Trading Emerging Market Catalysts With Direxion's Daily MSCI Emerging Markets Ex China Bull 2X Shares

Emerging markets have long presented a tantalizing prospect for growth-oriented investors. These economies, which include powerhouses like India, Korea, Mexico and Brazil, are in a transformative phase from developing nations to more industrialized economies. With their steadily rising economic growth, increasing per capita income and burgeoning financial markets, emerging markets present a variety of compelling investment opportunities. 

The allure of these markets primarily lies in their potential for rapid expansion, often offering higher returns compared to more established economies. However, investing in emerging markets requires a careful balance, as political instability, currency volatility and less mature regulatory frameworks also introduce significant risks. That said, there are plenty of reasons to be bullish.

Upcoming Emerging Market Drivers

There are a few key factors currently contributing to a positive outlook for emerging markets. The first is a peak in interest rates around the world, particularly in the U.S. Emerging markets generally have high amounts of dollar-denominated debt, so higher U.S. interest rates put a strain on those economies by reducing the market value of those debt holdings. Higher rates also drive the dollar higher, which hurts foreign currencies (and the assets denominated in them). History shows that emerging market equities often flourish following the Federal Reserve's initial rate cut, which is expected sometime in 2024, depending on the state of inflation. With that in mind, the Core PCE report (a measure of Personal Consumption Expenditures that includes all goods and services bought by U.S. households) on April 26th and the Fed interest rate decision on May 1st are potential catalysts to watch.

A second factor fueling growth expectations is political developments like the upcoming elections in India, the fifth largest economy in the world. The election started April 19th and ended June 1st, with results coming June 4th, and it could have profound economic implications. The results could significantly impact employment programs, subsidies and monetary policy, driving major investments into the country shortly after and beyond. 

China's Economic Uncertainty

While the outlook for emerging markets improves, it's important to note that China’s economy is facing significant hurdles. Once a powerhouse of relentless growth, China is now grappling with a slew of challenges, including a property crisis, weak consumer demand and rising youth unemployment. The International Monetary Fund’s labeling of China as a "drag" on global growth further underscores the nation's shift from powerhouse to problem child. With the threat of stagnation and widespread deflation looming over its economy and foreign investment retreating, the need for emerging market exposure ex-China is becoming more important.

Direxion's Emerging Markets ex China ETF

In light of the prospects of emerging markets and ongoing risks present in the Chinese economy, the Direxion Daily MSCI Emerging Markets ex China Bull 2X Shares XXCH represent a unique and strategic vehicle for investors seeking to tap into emerging markets' growth while sidestepping China’s uncertainties. This leveraged ETF seeks daily investment results, before fees and expenses, of 200% of the performance of the MSCI Emerging Markets ex-China Index^†, offering exposure to a broad array of emerging economies minus the Chinese market. It’s a play that acknowledges the vibrancy and potential of emerging markets while mitigating the risks tied to China’s current economic woes.

Embracing Emerging Market Opportunities

Emerging markets are ripe with potential, offering a compelling narrative of growth and transformation. Direxion’s Daily MSCI Emerging Markets ex China Bull 2X Shares provide a nuanced approach to capturing this potential, allowing investors to benefit from the upside in foreign markets while minimizing exposure to China’s downside. As always, the keys to success in these volatile environments are knowledge, diversification and a touch of caution. However, with Direxion’s ETF, investors have a tool to navigate emerging markets while leveraging growth opportunities in a calculated manner.

Harness emerging markets' growth while sidestepping China with Direxion's Daily MSCI Emerging Markets ex China Bull 2X Shares.

Featured photo by Kittitep Khotchalee on Unsplash.

This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.

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^†The Index is designed to capture the large- and mid-capitalization securities across 23 of the 24 emerging markets (with the exception of China) as defined by MSCI Inc. The Index is market cap weighted and covers approximately 85% of the free float-adjusted market capitalization of the selected countries. One cannot directly invest in an index.

An investor should carefully consider the fund's investment objective, risks, charges, and expenses before investing. The fund's prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a fund's prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. The fund's prospectus and summary prospectus should be read carefully before investing.

The Fund described herein is indexed to an MSCI Index. The Fund or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities or any index on which funds or securities are based. The Prospectus contains a more detailed description of the limited relationship MSCI has with Rafferty and any related funds.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments. 

Direxion Shares Risks – An investment in the Fund involves risk, including the possible loss of principal. The Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geographic region which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Risks of the Fund include Effects of Compounding and Market Volatility Risk, Leverage Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Daily Index Correlation Risk, Other Investment Companies (including ETFs) Risk, Cash Transaction Risk, Passive Investment and Index Performance Risk, and risks specific to emerging markets countries. Investing in emerging markets instruments involves greater risk than investing in issuers located or operating in more developed markets. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.

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