Cathay Securities, a division of Cathay Financial Holdings, has launched a new ETF in Taiwan, providing investors with leveraged exposure to the Dow Jones Industrial Average (DJIA).
The new ETF provides twice the daily return on the Dow Jones Industrial Average.
The Cathay Dow Jones Industrial Average Daily Leveraged 2X ETF (00852 TT) has listed on the Taiwan Stock Exchange (TWSE) and comes with an expense ratio of 1.03%.
The fund offers twice the daily return on the DJIA, a price-weighted average of 30 stocks traded on the New York Stock Exchange and the NASDAQ.
Commonly known as the Dow, the index dates back to 1896 and was created by Charles Dow, a US journalist also known for starting the Wall Street Journal. It is one of the oldest, single most-watched indices in the world and is seen as a barometer of the health of the broad US economy.
The original constituents were virtually all industrial in nature, reflecting the make-up of the US economy at the time. As the US economy has evolved, so has the constituents within the index.
Today the index comprises several financial companies, such as JP Morgan Chase and Goldman Sachs, as well as technology giants such as Intel, Apple, and IBM. Coca-Cola, Johnson & Johnson, McDonald’s, Pfizer, and Walt Disney are also constituents.
The fund is the first leveraged DJIA ETF to launch in Taiwan and serves to complement the Cathay Dow Jones Industrial Average Daily Inverse ETF (00669R TT).
Taiwan currently has one of the most developed inverse & leveraged ETF markets in Asia. This latest addition takes the total number of these specialty products to 38.
Most of the inverse & leveraged ETFs available in Taiwan target different segments of the equity markets of Taiwan, Japan, or China, though investors can also find products providing exposure to the S&P 500 and NASDAQ 100, as well as US Treasury bonds.
Inverse & leveraged funds can provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are generally considered unsuitable for retail investors who may not fully understand the risks involved.
This type of product tends to decay in value if held for an extended period of time, potentially leading to significant losses especially in volatile but range-bound markets. This characteristic generally increases with the degree of leverage involved.