Today, Direxion added to its lineup of leveraged and inverse ETFs with the launch of a 2X fund that covers emerging markets but excludes China. The Direxion Daily MSCI Emerging Markets ex China Bull 2X Shares (NYSE Arca: XXCH) offers twice the daily performance of the MSCI Emerging Markets ex China Index.
The fund has an expense ratio of 1.18%.
“Amidst the geopolitical swirl surrounding China, some traders are looking to separate the country’s stocks, while maintaining broader exposure to the emerging market countries. XXCH allows precise short-term exposure, providing a tactical opportunity for traders to independently manage their exposure to China's unique risks,” Ed Eglinsky, Direxion’s head of sales and alternatives, said.
He further noted the decline in China equities in 2023 was in marked opposition to the performance of other key emerging markets. Countries like India and South Korea posted strong gains during the same period, Eglinsky said.
Headwinds for China
China’s economy has struggled since the COVID-19 pandemic. The IMF recently published a summary of its findings after a consultation with the country. China has an ongoing real estate crisis and has seen demand for its products fall off more recently. Its aging population is also a longer-term drag on the economy among other factors, according to the report. It posited that the country will see a 4.6% increase in growth this year slowing to a 3.5% increase in 2028.
XXCH’s reference index covers large- and mid-cap securities selected from 23 emerging markets. It is the same index that underlies the $9.1 billion iShares MSCI Emerging Markets ex China ETF (EMXC). The fund is up 13.3% and added $5.6 billion in new assets over the past 12 months.
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