The MSCI Emerging Markets Index is up 31 percent year-to-date and China, that benchmark's largest geographic weight, is a primary reason why. However, it is not just the most familiar Chinese stocks trading in Hong Kong and New York that are lifting emerging markets equities this year.
Chinese A-shares, the stocks trading on mainland bourses in Shanghai and Shenzhen are surging as well. For example, the CSI 300 Index is one of the best-performing country-specific emerging markets benchmarks in the world this year.
That could entice risk-tolerant, short-term traders to consider the Direxion Daily CSI 300 China A Share Bull 2X Shares CHAU. Or it could mean opportunity is afoot with CHAU's inverse cousin, the Direxion Daily CSI 300 China A Share Bear 1X Shares CHAD. CHAD is an inverse though not leveraged play on Chinese A-shares.
Considering The Trades
“China A-shares account for roughly two-thirds of the market capitalization of Chinese stocks,” said Direxion in a recent note. “Until four years ago, there was no direct way for U.S. investors to invest directly in mainland Chinese stocks, which trade on the Shanghai and Shenzhen Stock Exchanges. Since 2013, U.S. investors have been able to access the Chinese market is through A-share ETFs."
Bullishness surrounding Chinese equities sets up short-term trades in CHAU, the US-listed ETF to apply leverage to A-shares. CHAU looks to deliver double the daily returns of the aforementioned CSI 300 Index. There are reasons aggressive, near-term traders should give CHAU a look.
“The surge in the yuan over the past year has also helped increase foreign purchases of Chinese securities,” said Direxion. “And since A-shares ETFs offer a way to access this category without having to perform due diligence on individual companies and/or avoiding the operational issues of investing directly in the market through the Stock Connect, foreign investors are taking notice.”
The Other Side
There is another side to the equation, one that could bode well for contrarians willing to consider CHAD. CHAD seeks to deliver the daily inverse performance of the CSI 300 Index. So if that index falls by 1 percent, CHAD should rise by the same amount.
“Contrarians, read: bears, may be thinking that the bulls are acting more like sheep,” notes Direxion. “A speculative mentality may be just one of the catalysts for a pullback. For many, valuations are starting to appear extended.”
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on Bankrate.com. The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.
All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the Bankrate.com rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.
Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.
Rate collection and criteria: Click here for more information on rate collection and criteria.