The Newest China ETF Has Been On Fire

Emerging markets exchange traded funds are performing well this year, easily topping their US-focused counterparts along the way. Within the realm of emerging markets funds, the ETFs that are truly impressing usually share one trait in common: large exposure to Chinese Internet stocks.

There are dedicated China Internet ETFs and diversified emerging markets funds that feature large exposure to these stocks that, in many cases, is well above what investors find in traditional, diversified emerging markets investments. Underscoring the strength in Chinese Internet names this year is this nugget: of the top 10 highest-returning ETFs of 2017, three have significant exposure to Chinese markets.

That theme has benefited the Direxion Daily CSI China Internet Index Bull 2X Shares CWEB, which debuted in the fourth quarter of 2016 as the first leveraged ETF dedicated to Chinese Internet stocks.

Looking At CWEB's Objective

CWEB attempts to deliver double the daily returns of the CSI Overseas China Internet Index, one of the most widely-followed benchmarks of Chinese Internet stocks.

“The Index is designed to measure the performance of the investable universe of publicly traded China-based companies whose primary business or businesses are in the Internet and Internet-related sectors, as defined by the index sponsor, China Securities Index Co., Ltd.,” according to Direxion, one of the largest issuers of leveraged ETFs. 

CWEB's index allocates about 82 percent of its combined weight to Internet software and e-commerce providers. Tencent Holdings Ltd. TCEHY, Alibaba Group Holding Ltd. BABA and Baidu.com Inc. BIDU are the index's top three holdings, combining for 28 percent of its weight. Traders looking to participate in short-term upside in Alibaba can benefit from judicious use of CWEB, as Alibaba makes up nearly 10 percent of the leveraged ETF's index.

Increased Attention

Traders have recently been warming to the idea of applying leverage to the scorching hot China Internet trade. Over the past month, CWEB has averaged daily inflows of more than $166,000, according to Direxion data. 

Over that period, Alibaba is up 14 percent and has been making a series of record highs, as has CWEB.

Related Links:

An Alibaba ETF. 

How To Trade Leveraged ETFs. 

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