How To Trade On Rising Chinese Inflation (YXI, CHIM, TAO)

Rising prices continue to be a major concern in China after the government reported February inflation of 4.9%.

While the figure was not unexpected by economists, that's of little comfort to Chinese consumers who have seen the price of essentials like food and housing rising for some time now.

The Chinese government is especially worried about an upset populace as unrest has spread from North Africa to the Middle East, leading to the fall of some rulers and intense pressure on others.

China's federal and local governments have undertaken a number of measures to fight inflation, such as raising interest rates, announcing the building and renovation of 10 million homes, increasing the share of deposits that banks are required to hold in reserve, raising down payment requirements and introducing property taxes used to cut into the profit of property sellers.

The hope is that these combined efforts will be enough to hold inflation down and improve consumer sentiment.

If there is a slowdown in the Chinese economy, the ProShares Short FTSE China 25 YXI is an ETF that investors could profit from. This ETF seeks daily investment results, before fees and expenses, that correspond to the inverse of the daily performance of the FTSE China 25 Index.

Although the Chinese government is trying to slow the economy's growth, the plan to build 10 million new homes could send the Global X China Materials ETF CHIM higher. This ETF gives access to the Chinese materials and commodities sector that would benefit from increased home building and the purchase of consumer appliances and furniture associated with it.

Investors who are interested in Chinese real estate should take a look at the Guggenheim China Real Estate ETF TAO. This ETF seeks investment results that correspond generally to the performance, before the Fund's fees and expenses, of an equity index called the AlphaShares China Real Estate Index, which is designed to measure and monitor the performance of the investable universe of publicly-traded companies and REITs deriving a majority of their revenues from real estate development, management and/or ownership of property in China or the Special Administrative Regions of China, such as Hong Kong and Macau.