However, unlike ASHR, the proposed Direxion ETF does not satisfy the criteria to qualify as a RQFII or QFII, so the proposed fund will invest a majority of assets in other investment companies, including ETFs, that replicate the undelrying index, along with swaps, futures contracts and other derivative instruments to replicate the inverse exposure to CSI 300 Index.

Currently, China limits foreign investors’ access to A-shares, which trade in Shanghai and Shenzhen, to Qualified Foreign Institutional Investors and Renminbi Qualified Foreign Institutional Investors. ASHR, for example, can directly trade A-shares due to its partnership with Harvest Global Investments, which holds a RQFII license.

Investor demand has been so robust for China A-share ETFs that Deutsche Asset & Wealth Management has been forced to limit creations in the ETF three times since September because it was bumping up against its Renminbi Qualified Foreign Institutional Investor (RQFII) limits. [A-Shares ETFs not Lacking for Fans]

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