We are not accustomed to seeing Chinese based equities fall sharply and suddenly, seemingly unabated, but such is the case currently at least when looking at FXI (iShares China Large Cap, Expense Ratio 0.74%), the largest China Equity based ETF in the U.S. listed landscape with more than $6.2 billion in AUM at the moment.
The fund is on a brutal two day losing streak where it has gapped back below its 50 day MA as of this morning for the first time since mid-December. Surely, Asia based Equities had a strong run for the first two months of this
year, but the quick give back of relative performance and short term profits for holders has to be alarming.
Year to date the fund has not seen heavy redemptions, with only about $100 million leaving thus far, and it is still substantially larger than the next mainland China fund in the space MCHI (iShares MSCI China, Expense Ratio 0.61%) with about $1.4 billion in AUM. GXC (SPDR S&P China, Expense Ratio 0.59%) and ASHR (Deutsche Harvest CSI 300 China A-Shares, Expense Ratio 0.82%) like MCHI are also $1 billion plus funds that should be monitored here as potential movers as well.
It is not surprising to see strong interest in two leveraged ETFs linked to China equity exposure here, specifically YANG (Direxion Daily China Bear 3X, Expense Ratio 0.95%) and YINN (Direxion Daily China Bull 3X, Expense Ratio 0.95%) which are generally embraced by traders and hedgers when China’s equity market makes significant moves like it has over the past 48 hours.
Both funds should probably be larger from an AUM standpoint, as YINN has approximately $120 million while YANG only has $11 million in AUM at the moment, but the ProShares China leveraged products are basically in the same situation (XPP (ProShares Ultra FTSE China 50, Expense Ratio 0.95%, $65 mln in AUM and YXI (ProShares Short FTSE China 50, Expense Ratio 0.95%, $4 mln in AUM). Then again, we have seen volume and asset flow swells in leveraged/inverse ETFs amid sudden volatility in the past so perhaps history can repeat itself here.
From a catalyst standpoint, some noise is starting to be made about BABA and its lagging performance lately, well ahead of its next scheduled quarterly earnings announcement (4/29/15). BABA is notably higher this morning trading as high as $82.68 after flirting with the low $80s yesterday (the stock traded as high as $99.70 the day of its IPO last September.