Direxion Files for 8 International Leveraged ETFs

Zacks

Direxion, along with their rival ProShares, dominates the leveraged ETF market. The company has just under 50 products in its lineup, and it has over $5 billion in total assets under management.

Some of its most popular funds are well known to active traders including FAS—tracking daily 3x bullish performance of the financial segment—and TZA—tracking Daily 3x bearish performance of the small cap market. Together, these two account for roughly 35% of Direxion’s assets, so clearly the firm is quite dependent on these two domestic names for revenues.

Possibly in hopes of diversifying their product mix, Direxion has recently filed for several new ETFs in the leveraged and inverse leverage market. In fact, the company filed for 8 new products, a number if approved that would bring the total offering of Direxion up to 54 (also read BDCL: Yield King of Leveraged ETFs).

The eight all target international markets with bull and bear pairs—and 3x leverage—for two developed and two emerging markets, offering up new exposure options. Still, investors should remember that these still have a ways to go before launching, though we have highlighted some of the key points regarding these potential ETFs below:

Chile

Direxion filed for two Chile ETFs tracking 3x and -3x versions—on a daily basis—of the MSCI Chile IMI 25/50 Index. For this exposure, both products will charge investors 1.10% a year in fees.

The index is also the basis for the popular unleveraged fund tracking the Chilean market, iShares MSCI Chile Capped ETF (ECH). This fund has just over half a billion in total assets, and sees about 170,000 shares in volume per day.

In terms of exposure, the product is tilted towards utilities at 25% of the assets, while financials and consumer staples round out the top three. Cap levels are heavily skewed towards large caps as these account for 85% of total assets (read Forget China, Buy These Emerging Market ETFs Instead).

Over the past one year period, ECH has slumped and is actually down about 5.1% in the time frame. Currently though, ECH has a Zacks ETF Rank of 2 or ‘Buy’.

Hong Kong

Looking across the Pacific, Direxion also revealed plans for 3x and -3x ETFs that track the MSCI Hong Kong Index on a daily basis. Exposure will be slightly cheaper in this liquid market, coming in at 1.08% a year for both the bear and bull funds.

Much like its Chilean counterparts, these funds look to be the leveraged versions of the iShares MSCI Hong Kong Index Fund (EWH). This product sees just under four million shares a day in volume, and a huge market cap approaching $3.5 billion.

This unleveraged ETF is heavily focused on financials, as real estate makes up 33% and financials account for 28% of assets. Consumer discretionary and utilities round out the top four while large caps make up nearly the entire fund (see Hong Kong ETFs to Surge in 2013?).

EWH has seen a solid performance over the past year, adding about 15.4% in the time frame. Currently, the fund has a Zacks ETF Rank of 3 or ‘Hold’.

Japan

Staying in Asia, Direxion is also looking to provide 3x and -3x daily exposure to the Japanese market. While there are a lot of popular indexes tracking this nation, these funds seek to use the MSCI Japan Index as their basis, charging 1.08% a year in fees.

Once again, there is a popular iShares product tracking the unleveraged version of the index, this time with EWJ. This product has seen its popularity surge in recent months thanks to the yen’s collapse, as it now has roughly 31 million shares in volume a day and a market cap approaching $9.5 billion (also see Small Cap Japan ETFs: Overlooked Winners?).

Exposure in this ETF is heavily concentrated in the large cap segment, while there is an even split between value and growth stocks. Sector holdings are heavy in the consumer discretionary market, with industrials and financials taking the other two spots.

In the trailing one year period, perceptions have shifted on EWJ and Japan in general, leading this fund to a 19.4% gain in the trailing 12 month time frame. As of now, this fund has a Zacks ETF Rank of 2 or ‘Buy’.

Mexico

Mexico ETF investments have been very hot lately, so it isn’t too surprising that Direxion is hoping to soon jump in to this market with daily 3x and -3x funds. Both will track the MSCI Mexico IMI 25/50 Index with their respective leverage rates over a single day, charging 1.10% in fees for the exposure.

The iShares unleveraged counterpart in this market is the MSCI Mexico Capped ETF (EWW). This fund has just over three billion in total assets and just below 2.5 million shares of volume in a normal session.

Exposure in this fund is somewhat concentrated, as consumer staples account for nearly 30% of the portfolio, followed by 20% in materials, and 17% in telecoms. Large caps also dominate from a cap perspective, although less so here than in other funds on the list, accounting for about 75% of the total.

This ETF has been the best performer of the four during the past year, gaining 23.7% in the time frame. This fund also receives our highest rating with a Zacks ETF Rank of 1 or ‘Strong Buy’, so good things could continue in this product in the months ahead (see Inside the Surging Mexico ETF).

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Read the analyst report on ECH

Read the analyst report on EWW

Read the analyst report on EWJ

Read the analyst report on EWH

Read the analyst report on FAS

Read the analyst report on TZA

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