ETF Trends
ETF Trends

Chinese stocks and exchange traded funds trading in the U.S., including beleaguered A-shares funds, are rallying in impressive fashion Thursday as each of the top 18 ETFs in terms of percentage and 19 of the top 20 are China funds.

And of those 19, six are A-shares funds, ETFs tracking stocks that trade in Shanghai and Shenzhen. The Shanghai Composite surged almost 5.8% during Thursday’s Asian session, an impressive move but hardly enough to make investors that the benchmark mainland index is still off a staggering 24.1% over the past month.

In search of a rally for Chinese stocks, one that finally arrived today, some traders have pouring into leveraged China ETFs. For example, the Direxion Daily China 3x Bull (NYSEArca: YINN) added more than $20.7 million in new assets on Wednesday, good for the best total among all of Direxion’s triple-leveraged ETFs, according to issuer data.

YINN attempts to deliver triple the daily performance of the FTSE China 50 Index, making the fund the triple-leveraged answer to the iShares China Large-Cap ETF (NYSEArca: FXI), the largest U.S.-listed China ETF. YINN is up a tidy 15.3% at this writing on volume that is already more than triple the daily average. [Upping the Ante With China ETFs]

The Direxion 2x Daily CSI 300 China A Share ETF (NYSEArca: CHAU), the first leveraged A-shares ETF to list in the U.S., is Thursday’s real show-stopper among ETFs. The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest U.S-listed A-shares ETF, is higher by 18% on roughly two and half times the average volume, spelling excellent news for CHAU. [Traders Rush to Inverse, Leveraged A-Shares ETFs]

CHAU, the double-leveraged answer to ASHR, is easily today’s top percentage gainer among ETFs, soaring by 35.3% on better than five times the average turnover. Thursday will likely be CHAU’s best percentage performance and one of its heaviest volume days since coming to market in mid-April.

On Monday, we noted that CHAU could be poised for big near-term gains because ASHR was trading at a steep discount to its net asset value. There is more to CHAU’s story that indicates significant upside could be ahead. To quantify that upside, it would not be unreasonable to expect CHAU to run 15% to 16% to the upside, maybe more, when A-shares rebound. Here’s why: ASHR was spotted Monday trading at a significant discount to its net asset value. Add to that, CHAU could be gain a “rebate” as counterparties continue to loan shares of ASHR out to short sellers. [Leveraged A-Shares ETF Could Tempt]

Through Wednesday, CHAU has seen almost $4 million in inflows. To be sure, traders are not shying from bearish leveraged China funds, either.

While YINN looked great with its $20.7 million in Wednesday, the Direxion Daily FTSE China Bear 3X Shares (NYSEArca: YANG) added $15.8 million in new assets yesterday, more than any other triple-leveraged bear ETF from Direxion.

CHAU’s inverse cousin, the Direxion Daily CSI 300 China A Share Bear 1x Shares (NYSEArca: CHAD), arguably the epitome of a “right place, right time” ETF, has added $21.6 million in new assets just this week. That brings CHAD’s AUM total to the $190 million area, an impressive sum for an ETF that is not yet a month old. Even with Thursday’s 19% loss, CHAD is still up 22.2% since coming to market.

Direxion Daily CSI 300 China A Share Bull 2X Shares