Confidence may be creeping back into China stocks again as investors could be sensing a bottom has finally taken place. If that's the case, short-term traders and long-term investors may want to give them a second look. They could potentially be in an area of value.
One big player in the institutional investor space, UBS Group, is already eyeing Chinese equities for opportunities. After a three-year losing streak, things could finally turn for the better.
"The worst may be over for Chinese stocks after three straight years of losses dealt a US$1.4 trillion wipeout, as a recovery in corporate earnings takes hold amid a ramp-up in policy support in the world’s second largest economy, according to Swiss bank UBS Group," the South China Morning Post reported.
China's government has been injecting stimulus measures to help pump the economy back into life. Now it's offering incentives to hold A-shares, according to a China Daily report. Whether it's a shot of desperation via a Hail Mary pass into the end zone or a strategic move to entice investors remains to be seen.
"The China Securities Regulatory Commission (CSRC) will strengthen incentives for fund management companies to boost holdings in Chinese A shares as the long-term return prospect of the market has improved," the report said. That's according to Lin Xiaozheng, deputy head of the CSRC's department of fund and intermediary supervision.
2 Leveraged Options in China Stocks
Lin noted there's a firm belief China's economy is set to recover. That makes the long-term prospects of A-shares a relative value given their current prices. The timing could be right for traders to buy into A-shares if a move to the upside eventually takes place. With that, they have a pair of leveraged options from Direxion Investments to maximize their profit potential.
One option directly focuses on A-shares. That's the Direxion Daily CSI 300 CHN A Share Bull 2X ETF (CHAU). It offers 200% exposure to the CSI 300 Index (CSIN0301). That is a modified free-float market-cap-weighted index. It comprises the largest and most liquid stocks in the Chinese A-share market.
A triple leverage option, 300% exposure, is the Direxion Daily FTSE China Bull 3X ETF (YINN). It tracks the FTSE China 50 Index (TXIN0UNU). This index consists of the 50 largest and most liquid public Chinese companies currently trading on the Hong Kong Stock Exchange as determined by FTSE/Russell.
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