Panda bears might be native to China, but it was exchange-traded fund (ETF) bears dwelling in the Chinese equities space on Tuesday with the Daily FTSE China Bear 3X Shares (NYSEArca: YANG). As the threat of trade wars permeated the capital markets, YANG was up 8.03 percent.
Meanwhile, volatility rained down on U.S. equities and saw the Dow Jones Industrial Average fall as much as 600 points before settling for a 473-point drubbing at the close of Tuesday’s trading session. It was the Dow’s worst loss since January 3 as the wall of worry got taller over U.S.-China trade talks deteriorating.
U.S. President Donald Trump threatened to impose a higher an increase in existing tariffs on Chinese goods on Friday with the hope that it will force China’s hand in relenting to a trade deal. Various reports reveal that China has been waffling on its negotiations with the U.S., which caught the ire of President Trump, causing him to send tweets that roiled the markets.
The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade. With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!
— Donald J. Trump (@realDonaldTrump) May 6, 2019
“The Trump administration’s doubling down on the China threats has been a gut punch to bulls,” said Daniel Ives, managing director of equity research at Wedbush Securities. “Investors do not want to add risk going into trade talks this week, given the shot across the bow from the administration.”
Of course, YANG traders are rejoicing the latest events. The fund seeks daily investment results equal to 300 percent of the inverse (or opposite) of the daily performance of the FTSE China 50 Index. The index consists of the 50 largest and most liquid public Chinese companies currently trading on the Hong Kong Stock Exchange (“SEHK”).
Whether a trade deal will happen by week’s end or not will certainly put China-focused ETFs in the spotlight. As such, other leveraged ETFs to play include the Direxion Daily FTSE China Bull 3X ETF (NYSEArca: YINN), Direxion Dly CSI 300 China A Share Br 1X ETF (NYSEArca: CHAD), Direxion Daily CSI 300 CHN A Share Bl 2X ETF (NYSEArca: CHAU), and Direxion Daily CSI CHN Internet Bull 2X Shares (NYSEArca: CWEB).
“The biggest threat to this market is the U.S.-China trade issues,” Ives said. “If China and the U.S. dig in on trade, it’s time to put on the hard hat because the market could go down another 10% plus.”
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