Bearish on Your Short-Term Prospects in Chinese Markets?

China’s latest lockdown measures could be dampening growth markets, causing bearish sentiment to rise in funds like the Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD).

CHAD seeks daily investment results, before fees and expenses, of 100% of the inverse of the daily performance of the CSI 300 Index. The fund, under normal circumstances, invests in swap agreements, futures contracts, short positions, or other financial instruments that, in combination, provide inverse (opposite) or short exposure to the index equal to at least 80% of the fund’s net assets (plus borrowing for investment purposes).

The fund recently ticked past 6% near the end of July, but has since fallen back to earth. Of course, a rising number of Covid cases has had a hand in that recent uptick.

“Markets have got into the mode of thinking Covid is very … bad, but economic recovery (is) taking away lockdowns, removing social restrictions — that’s kind of the world recipe at the moment,” David Roche, president and global strategist at Independent Strategy, told CNBC.

“Well it’s very much not the world recipe in China for good reasons, and therefore markets have to come to terms with the fact that there are economic costs not only within China, but globally as a result of this,” he added.

CHAD Chart

Betting on a Recovery

Despite the recent decline, the other side of the trade involves a strong recovery. If it comes swiftly, then the Direxion Daily FTSE China Bull 3X ETF (YINN) is worth a look.

China has ambitious goals with its five-year plan for greater self-reliance. As the second-largest economy looks to divest itself from relying on other nations in critical industries like technology, the case for YINN grows.

As for the fund itself, YINN seeks daily investment results equal to 300% of the daily performance of the FTSE China 50 Index. As far as the index is concerned, it consists of the 50 largest and most liquid public Chinese companies currently trading on the Stock Exchange of Hong Kong–liquidity.

To summarize its benefits, YINN gives traders the ability to:

  • Magnify short-term perspective with daily 3X leverage;
  • Go where there’s opportunity, with bull and bear funds for both sides of the trade; and
  • Stay agile, with liquidity to trade through rapidly changing markets

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