How to Prep for More Declines in Chinese Stocks

One of the primary reasons emerging markets stocks and exchange traded funds are struggling this year is slumping Chinese shares. Some traders are forecasting more declines for Chinese equities, which could benefit the  Direxion Daily FTSE China Bear 3X ETF (NYSEArca: YANG).

YANG looks to deliver triple the daily inverse returns of the FTSE China 50 Index (TXIN0UNU). Recently, the world’s second-largest economy’s latest gross domestic product numbers showed that economic growth slowed to 6.5% year-over-year in the third quarter, missing expectations of 6.6%.

The jitters in the country’s markets could put China in a precarious position if trade wars persist with the United States, However, a white paper published by China last month revealed that the country can economically withstand the effects of a long, drawn-out trade war between the two economic superpowers, but it took extra measures for preparation when the Chinese central bank cut the amount of reserves held by banks.

Although it retreated Wednesday, YANG surged more than 26% in October.

Concerning Divergence

Some traders are concerned about the growing divergence between U.S. and Chinese stocks.