Direxion debuts inverse China A-Shares ETF

Jun 30th, 2015 | By | Category: Alternatives / Multi-Asset

Direxion Investments, a US-based provider of short and leveraged exchange-traded funds, has launched the first ever US-listed ETF providing short exposure to the Chinese A-Share market. The Daily CSI 300 China A Share Bear 1X ETF (NYSE Arca: CHAD) tracks the inverse return of the CSI 300 Index, a market-cap weighted index of the 300 largest firms listed in mainland China.

Direxion debuts inverse China A-Shares ETF

Brian Jacobs, President of Direxion Investments.

The recent volatility in Chinese equity prices (the Shanghai A-Share Stock Price Index, which covers all A-Share companies listed on the Shanghai Stock Exchange, dropped 16.4% between 9 – 30 June 2015) has highlighted the need for more flexible tools when investing in these markets.

Brian Jacobs, President of Direxion Investments, explains: “China A-shares have become very popular with US investors and traders because they recently became accessible through ETFs. There are those who may want to hedge China A-share exposure, however, and this new ETF offers a way for traders with a contrarian view of this asset category to seek protection or profit.”

Foreign investment in China’s A-Shares (domestically listed, renminbi-denominated shares) remains tightly controlled through the Qualified Foreign Institutional Investor (QFII) program which was officially launched in 2003. Under this agreement, access to A-Shares was approved for only a limited number of institutional investors with strict trading quotas applied.

Direxion remains committed to providing access to this market however; the launch of the Daily CSI 300 China A Share Bear 1X ETF swiftly chases the successful April launch of the CSI 300 China A Share Bull 2X ETF (NYSE Arca: CHAU). The latter fund offers leveraged bull exposure to China’s A-shares by providing twice the daily return of the CSI 300 Index.

As of 30 June 2015, the index had significant exposure to the financials (37.8%), industrials (18.5%), consumer discretionary (10.8%), materials (7.1%) and information technology (6.9%) sectors. The largest constituent was Ping An Insurance Group (3.8%). The net expense ratio of the bearish fund is 0.80% due to a cap on management fees which will remain in place until September 2016. The fund’s gross expense ratio is 1.01%.

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