Direxion is a key player in the leveraged and inverse leveraged ETF market, possessing a decent chunk of total funds and assets in the space. Most of the funds in the company’s lineup though, focus in on U.S. sectors or market cap levels, giving the firm a domestic tilt.
Yet, with the rise of international markets and investors’ increased desire for global exposure, this is slowly beginning to change. In fact, Direxion has recently expanded its lineup in the levered emerging market space, zeroing in on Brazil and Korea in particular.
The first play on these markets from Direxion came to us in the form of long products, BRZU and KORU, respectively targeting Brazil and Korea with 300% daily resetting exposure. The company is now looking at the short side of these markets, as it has just launched complimentary bear ETFs for these two increasingly important nations (see Direxion Launches 2 Emerging Market Leveraged ETFs).
These new funds could open up new trading opportunities for those seeking to make a short-term play on either of these key markets. So for investors seeking a different way to target Brazil or Korea, or for those seeking to hedge their current exposure to these two nations, we have highlighted some of the key details about both below:
Direxion Daily Brazil Bear 3x Shares (:BRZS)
This new ETF looks to focus on triple the inverse performance of the MSCI Brazil 25/50 Index on a daily basis. The approach results in a focus on mid and large cap Brazilian companies, charging investors 95 basis points a year in fees.
Investors should also note that financials take up the top spot in the index, accounting for over one-fourth of the total assets. This is followed by materials (17.8%), staples (15%), and energy (13.7%) to round out the top four (see Will Brazil ETFs Rebound in 2013?).
The fund also represents the bear counterpart to the just launched Daily Brazil Bull 3x Shares (BRZU) from Direxion. And both of these can be thought of as daily leveraged versions of the ultra-popular MSCI Brazil Capped ETF (EWZ), a fund which has lost about 3.2% so far in 2013.
Direxion Daily South Korea Bear 3x Shares (:KORZ)
This fund seeks to track triple the inverse performance of the MSCI Korea 25/50 Index on a daily basis. The result is a fund that zeroes in on large and mid cap Korean firms, charging investors 95 basis points for this exposure.
In terms of holdings, technology takes the top spot, comprising nearly 31% of the total. Beyond that, four more sectors have double digit allocations including consumer discretionary, financials, industrials, and materials (see Is the Korea ETF About to Breakout?).
KORZ is also the bear version of the recently launched Daily South Korea Bull 3x Shares (KORU) from Direxion. This duo can also be thought of as the daily leveraged versions of the well-known MSCI South Korea Capped ETF (EWY), a fund that has lost about 10.1% so far in 2013.
Both BRZS and KORZ could be quite volatile and see big swings in a short time period. The use of triple leverage and emerging markets is a potent combination, and thus these funds should be exclusively used by short term traders (see Time to Buy Emerging Market ETFs?).
This is especially true when considering the -3x exposure profile of the ETFs and the daily rebalancing which can result in these moving differently than what some investors might expect over long time periods. Nevertheless, for short-term traders, these two funds could make for compelling options, particularly if weakness continues to abound in these two markets.
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