Interest rates, trade wars and a global economic slowdown may be adding to the wall of worry for traders, but it doesn’t mean there aren’t opportunities to be had. Two areas, in particular, are in China and robotics.
While ongoing trade negotiations between the U.S. and China have the capital markets eagerly anticipating a tangible trade deal, stimulus measures by the Chinese government to prop up the domestic economy are starting to take its effect.
A mix of Chinese stimulus measures have been providing the fodder for economic growth, such as lower taxes, no corporate tax breaks, monetary policy adjustments, and more market access for foreign companies to set up shop. All in all, Wall Street is looking at the Chinese government’s latest efforts as a plus for its economy and a boon for China ETFs.
Additionally, China is becoming less resistant to safeguarding its businesses, which will open the pathways to more foreign investment. Forbes reported this week that Chinese officials are meeting to discuss which sectors to give access to foreign investors.
China ETFs have also been the beneficiaries of index provider MSCI Inc. announcing recently that it would quadruple its weighting of large-cap Chinese shares in its benchmark indexes. In a press release, MSCI Inc. said it would increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps.
The decision came after an extensive global consultation with a large number of international institutional investors, including asset owners, asset managers, broker/dealers and other market participants worldwide. MSCI said the proposal to increase the weight of China A shares garnered overwhelming support from investors.
To play China, leveraged ETFs to watch going forward for traders include the Direxion Daily FTSE China Bull 3X ETF (NYSEArca: YINN), Direxion Daily FTSE China Bear 3X ETF (NYSEArca: YANG), 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).
“China pops up pretty materially–both the bull product and the bear product,” David Mazza, Head of Product at Direxion Investments told ETF Trends. “Depending on what’s happening in performance, you see one over another gaining the most interest and from a volume perspective, we’ve seen both increase materially.”
Related: ETF of the Week: VanEck Vectors India Small-Cap ETF (SCIF)
Rise of the Robots
Robotics, artificial intelligence (AI), machine learning, or any other type of disruptive technology is slated to the next wave of innovation. For investors who missed out on the serendipitous run of FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks, they can look to capitalize on disruptive tech options in 2019.
Disruptive technology is not relegated to certain sectors as it will permeate into all industries in some form or fashion. For example, augmented reality is technology comprised of digital images superimposed over the real world, and its use is primed to drive industry growth–industries like real estate and manufacturing are already putting the technology to use in a variety of ways.
Traders can take advantage of the rise in robotics through the Daily Robotics, Artificial Intelligence & Automation Index Bull 3X Shares (NYSEArca: UBOT). UBOT seeks daily investment results equal to 300 percent of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, which is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence.
UBOT is up 52.66 percent according to Morningstar performance figures.
“That (UBOT) has seen a real nice uptick in volume as of late,” said Mazza. “Part of that comes from the performance side.”
For more market trends, visit ETF Trends.
