China is putting a stranglehold on its largest tech companies, causing investors to fret while bearish traders rejoice with ETFs like the Direxion Daily CSI 300 China A Share Bear 1X Shares (CHAD).

CHAD has risen about 4% the last few months as China confounds investors with their latest regulatory measures to tamp down monopolistic overtones in big tech. CHAD overall seeks daily investment results that equal 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). Its 100% exposure limits the potential drawdown of a 300% fund, but in turn loses out on the gains of a 300% fund.

Less-seasoned traders looking for an inverse play may want to consider this fund for that reason. It could also be used as a hedging position for investors who are long in other Chinese equities.CHAD Chart

Chinese Government’s Tech Crackdown

In the meantime, regulatory measures keep mounting for China’s big tech companies like Alibaba, Tencent Holdings, and Baidu. These large-cap companies are also weighing down on the Chinese stock market with their gargantuan market capitalizations.

“Concerned about the growing power of its largest technology companies, China authorities recently started issuing a flood of antitrust and antimonopoly laws and they show no signs of slowing. The activity has devastated China stocks,” an Investor’s Business Daily article explained.

“The regulatory tightening started with a trickle late last year, but intensified in terms of its duration, intensity and scope. Moreover, China leaders continue to offer no sign of what’s to come,” the article added further.

As a result of these latest moves, investors are in a daze. The savvy ones could use funds like CHAD to capture gains while Chinese equities are on the downside.

“It feels like an episode from the Twilight Zone, where no one knows what Big Brother from Beijing is going to do at any given moment,” Wedbush Securities analyst Dan Ives told Investor’s Business Daily.

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