In a word, China - and in a larger sentence, they all have significant influences, stakes, opinions, and perspectives on what China does. As an added bonus their English first names all start with the letter “J” (Xi is technically considered a last name). These players may seem completely unalike at first glance, but they’re all playing a similar game, albeit from vastly different seats at the table.
The direction that China takes as a country and as an economy has become more and more of a hot topic. As the Chinese economy has grown incredibly rapidly over the past few decades, the opportunities and risks surrounding it have also grown. For investors and traders, even leaving politics and philosophy out of the equation, questions still seem to loom large. What kinds of risks and rewards are there in Chinese business and industry? What are some possible ways to capitalize on opportunities while not taking on too much undue risk?
A New Dynasty for the Markets
While giant Chinese stocks like Alibaba (NYSE: BABA), China Construction Bank (OTCMKTS: CICHY), and Tencent (OTC, TCEHY) are arguably very well known and trusted as Chinese blue-chip equivalents, it was not so long ago that most Chinese stocks seemed to be high-risk and uncommon for many investors and traders to be actively involved. As many Chinese stocks have skyrocketed in value, individuals, funds, and institutions have piled into investing in the nation’s industries on both the long* and short** sides.
While individual stocks are certainly an option, volatility can be more pronounced in the Chinese market, and for individuals with an approach toward trading for short term gains, leveraged ETFs like the Direxion Daily FTSE China Bull (YINN) and Bear (YANG) 3X Shares may provide nimble vehicles for trading on indexed groups. The YINN and YANG ETFs are two sides of the proverbial market coin, YINN being for a bullish outlook, and YANG for a bearish. These ETFs are benchmarked on the FTSE China 50 Index (TXIN0UNU), which is an index that “comprises 50 of the largest and most liquid Chinese stocks listed and trading on the Hong Kong Exchange (HKEx)” - a bulwark for market dependency in uncertainty.
For the last three months, or so, YANG, the bear fund has trended steadily higher. Whether that trend continues is anyone’s trade.
YahooFinance data represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. For standardized and month-end performance and holdings click here.
Whatever does take place in the geopolitical and economic landscapes that permeate and surround China, traders and investors should take the time to be aware of the opportunities and risks in a holistic way with the future in mind.
*Long: To invest in a security with the expectation it will increase in value.
**Short: To bet that a given security or index will produce a negative return, by either borrowing a security and selling it, or using derivatives to return the inverse return of an underlying security or security index.
Investing in a Direxion Shares ETF may be more volatile than investing in broadly diversified funds. The use of leverage by a Fund increases the risk to the Fund. The Direxion Shares ETFs are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking daily leveraged, or daily inverse leveraged, investment results and intend to actively monitor and manage their investment.
Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns. Because of ongoing market volatility, fund performance may be subject to substantial short-term changes. For additional information, see the fund’s prospectus.
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.
Direxion Shares Risks – An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with the Funds’ concentrating their investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Risks of each Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Market Disruption Risk, Aggressive Investment Techniques Risk, Counterparty Risk, Intra-Day Investment Risk, risks specific to Chinese securities, including Chinese Government Risk, Chinese Markets Risk, Chinese Currency Risk, and Hong Kong Securities Risk. The Chinese economy is generally considered an emerging market and can be significantly affected by economic and political conditions and policy in China and surrounding Asian countries. Securities from issuers in emerging markets face the potential for greater market volatility, lower trading volume, higher levels of inflation, political and economic instability, greater risk of market shutdown and more government limitations on foreign investments than typically found in more developed markets. Additional risks include, for the Direxion Daily FTSE China Bull 3X Shares, Daily Index Correlation/Tracking Risk and Other Investment Companies (including ETFs) Risk, and for the Direxion Daily FTSE China Bear 3X Shares, Daily Inverse Index Correlation/Tracking Risk, and risks related to Shorting and Cash Transactions. Please see the summary and full prospectuses for a more complete description of these and other risks of each Fund.
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