Time For These China ETFs To Shine

With trade tensions again running hot between the U.S. and China, stocks in both countries are being punished, but that scenario is putting the spotlight on a pair leveraged exchange-traded funds.

What Happened

Over the course of last week, the FTSE China 50 Index (TXIN0UNU), a widely followed gauge of large- and mega-cap Chinese stocks trading in Hong Kong, slid 5.72 percent, putting the index back into territory its hasn't seen since the end of January.

This decline comes following another escalation in the prolonged trade spat, as Beijing announced Monday its plan to raise tariffs on $60 billion in U.S. goods from 10 percent to 25 percent. This was in response to the Trump Administration's own declaration earlier in the month that it would increase tariffs on $200 billion in Chinese by that same margin.

Increased volatility in Chinese stocks and subsequent declines are proving to be a boon for the Direxion Daily FTSE China Bear 3X Shares YANG, which attempts to deliver triple the daily inverse returns of the FTSE China 50 Index.

Why It's Important

Entering Monday, YANG opened the day more 9 percent above its Friday close. As of that open, the ETF is up 30 percent on a month-to-date basis, making it the best performer among Direxion's leveraged bearish ETFs this month.

YANG's recent price action underscores an important point: when treated as the short-term instruments they are intended to be, leveraged ETFs can be the ideal avenues for active traders to profit from geopolitical headline risk, such as trade tensions.

Predictably, YANG's bullish counterpart, the Direxion Daily FTSE China Bull 3X Shares YINN, has been getting decimated. YINN, which looks to deliver triple the daily returns of the FTSE China 50 Index, lost 9.5 percent over the tumultuous trade weekend, bringing its month-to-date loss to over 25 percent and making the fund one of the worst-performing Direxion leveraged bullish funds to start May.

What's Next

As for what's next for YINN and YANG, data suggest some traders are positioning for a rebound in Chinese stocks. For the 10 days ended May 12, traders added $44.30 million to the bullish YINN, while the bearish YANG ranked among the top 10 Direxion bearish funds for outflows during that period.

Related Links:

A Super Switzerland ETF

Lots Of Commission-Free ETFs Here

Posted In: Direxion ETFLong IdeasNewsShort IdeasEmerging MarketsEmerging Market ETFsEventsGlobalTrading IdeasETFs

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.