fbpx
QQQ
+ 1.31
311.52
+ 0.42%
DIA
-5.22
319.22
-1.66%
SPY
-2.36
384.73
-0.62%
TLT
+ 4.58
133.96
+ 3.31%
GLD
-4.03
169.90
-2.43%

Some Traders Saw The Emerging Markets Decline Coming

by
February 14, 2018 5:02 pm
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More
Some Traders Saw The Emerging Markets Decline Coming

Emerging markets equities and exchange traded funds have been caught up in the drama recently afflicting U.S. stocks. For example, the widely followed MSCI Emerging Markets Index is down 7.5 percent over the past week while the FTSE China 50 Index, a gauge of the largest Chinese stocks trading in Hong Kong, is lower by 5.6 percent over that period.

 

Should emerging markets stocks continue faltering, it would not be surprising to see some traders flock to inverse ETFs, including the Direxion Daily MSCI Emerging Markets Bear 3X Shares (NYSE:EDZ). After jumping about 10 percent the Monday before the sell-off on volume that was roughly quadruple the daily average, the Direxion Daily MSCI Emerging Markets Bear 3X Shares sported a scintillating one-week gain of nearly 25 percent.

 

EDZ attempts to deliver triple the daily inverse returns of the MSCI Emerging Markets Index. The fund's bullish counterpart, the Direxion Daily MSCI Emerging Markets Bull 3X Shares (NYSE:EDC), was punished to the tune of 21.5 percent over that week.

 

Already Drawing A Crowd

 

Some traders were not surprised by the recent bullishness surrounding the bearish EDZ. For the five days ended Feb. 2nd, volume in the triple-leveraged inverse ETF was 73.6 percent higher than the trailing 20-day average, according to Direxion data.

 

Inflows accompanied that large volume increase. Over the past month, traders have been adding an average of almost $540,000 to the bearish EDZ, according to Direxion data. Interestingly, EDC's average daily inflows over the same period are over $1.8 million. 

 

Emerging markets stocks are consistently more volatile than U.S. equities, reminding traders that products like EDC and EDZ are best used as short-term trades confined to a day or two. Just look at the punishment suffered by traders that held EDC for the last five days.

 

China, Too

 

The Direxion Daily FTSE China Bear 3X Shares (NYSE:YANG), which seeks to deliver triple the daily inverse returns of the FTSE China 50 Index, is also surging and drawing acclaim from traders.

 

YANG jumped as high as 50 percent from its February low during the spike in volatility and is currently up 25 percent for the month.

 

Traders were prepared for YANG's recent jump as well as the bearish China fund averaged daily inflows of nearly $419,000 over the past month, according to issuer data.

 

Related Links:

 

A New Way To View EM Bonds. 

 

A Nifty Idea For International Dividends. 


Related Articles

Wall Street Remains Bullish On China

The November rally in U.S. equities may be garnering most of the attention (especially as we get closer to having a COVID-19 vaccine) but don’t sleep on China. Among Direxion’s stable of leveraged ETFs, two of the five top-performing funds year to date provide magnified exposure to China. Here’s a breakdown of what has driven each fund higher. read more

Emerging Markets Excitement Beckons For This Direxion ETF

Likely aided in large part by the results of the recent U.S. presidential election, the widely followed MSCI Emerging Markets Index is higher by 6.54% over the past month. read more

Gear Up For An Emerging Markets Turning Point With EDC

With the MSCI Emerging Markets Index down 3.77% year-to-date, this will likely go down as another disappointing year for developing world equities. read more

3 Leveraged Emerging Markets Traders Should Consider in Q1