Up just over 14% within the past month, the performance of the Direxion Daily FTSE China Bull 3X ETF (YINN) could be signaling that bulls are back in China equities. The more curious question, of course, is will they stay?
China’s government has been injecting measured stimulus dollars, but some market experts think a fire hose approach may be necessary as opposed to a steady trickle. The country did reveal a 2024 budget plan, but a Bloomberg article revealed that investors weren’t necessarily salivating at the chance to snatch up China equities after looking at the plan’s fine print.
YINN tracks the FTSE China 50 Index (TXIN0UNU). This index consists of the 50 largest and most liquid public China companies currently trading on the Hong Kong Stock Exchange as determined by FTSE/Russell. With the additional 300% leverage, China investors can maximize profit potential on their bullish inclinations.
In an effort to try and revitalize its economy, the country is also looking to ease tourist visas to bring in more foreign capital. Aside from government stimulus dollars, it’s one of the myriad ways it is exploring to help its economy.
“I think there is a general mobilisation of policy and resources to attract foreigners back to China,” said Yun Sun, senior fellow and co-director of the east Asia Program at the Stimson Center.
Speaking of travel, a potential leveraged ETF opportunity here could be the Direxion Daily Travel & Vacation Bull 2X Shares (OOTO). The current spring break and forthcoming summer travel could see more tourists head to China if the relaxed visa restrictions work. The country hopes these measures produce some tangible results to help resuscitate its economy.
Go Broader on Emerging Markets
The comeback of emerging markets (EM) has been a broader topic aside from China’s economic struggles. Rate cuts happening at some point could weaken the dollar and thus strengthen EM assets.
Traders who aren’t as bullish on the country, but are so on broader EM, may want to take a look at the Direxion Daily MSCI Emerging Markets Bull 3X Shares (EDC). The fund seeks daily investment results equal to 300% of the inverse performance of the MSCI Emerging Markets Index. That index is designed to represent the performance of large- and midcap securities across emerging market countries.
As China tries to get its economic house in order, even more discerning traders can get exposure to EM without China equities. This is available using the Direxion Daily MSCI Emerging Markets ex China Bull 2X Shares (XXCH), which offers twice the daily performance of the MSCI Emerging Markets ex China Index.
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