The FTSE China 50 Index jumped 9.50% on Monday and the basic exchange traded fund tracking that index followed suit on volume that was more than double the daily average.
That's an impressive move for an index that allocates 46% of its weight to bank stocks and one that confirms that despite all the coronavirus controversy, China is one of best-performing major equity markets in the world this year.
Big rallies in short time frames with Chinese stocks have a way of fostering doubt and while it remains to be seen if this time is different, there could be more to had over the near-term with Chinese equities.
“While some strategists are cautious about fundamentals and other risks, investor momentum, strong economic data, and supportive policies could give the rally, especially in domestic A-share stocks, further legs, at least for a bit,” reports Barron's.
Traders looking to capitalize on more near-term upside, emphasis on “near-term,” the following leveraged exchange traded funds are worth considering.
The Direxion Daily FTSE China Bull 3X Shares /zigman2/quotes/202282639/composite YINN -2.51% attempts to deliver triple the daily results of the aforementioned FTSE China 50 Index. In other words, if a trader is looking for a geared bet on Chinese banks with some Tencent /zigman2/quotes/207908563/delayed TCEHY -0.83% sprinkled in, YINN is the way to go.
Yes, YINN's underlying index is prosaic in its approach to Chinese stocks, but that doesn't diminish the fund's ability to deliver near-term excitement. On Monday, YINN surged 28.46% on volume that was more than triple the daily average.
TheDirexion Daily CSI China Internet Index Bull 2X Shares /zigman2/quotes/209320846/composite CWEB +2.62% looks to deliver double the daily returns of the CSI Overseas China Internet Index, giving traders a geared option on a group of equities that are leading the China rally.
Tencent,Alibaba /zigman2/quotes/201948298/composite BABA -0.68% and JD.com /zigman2/quotes/205122565/composite JD +2.41% combine for more than 28% of that index. Data confirm online shopping and e-commerce are rebounding in China after being dented by the coronavirus earlier this year.
“The number of unique visitors to online shopping sites has improved 5% from the low in February and insurance premiums have resumed growth,” according to Barron's.
CWEB is up almost 43% over the past month.
The Direxion Daily CSI 300 China A Share Bull 2X Shares /zigman2/quotes/204138538/composite CHAU +1.61% is the dominant name among geared ETFs with exposure to A-shares, the stocks trading on mainland China. While it's a double-leveraged fund, that's enough for some excitement as was seen on Monday when CHAU surged nearly 23% on more than six times the average volume.
What's potentially compelling about A-shares over the near-term is that the rally in the group is, in large part, being facilitated by an influx of foreign capital.
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