A-Shares Move Renews Interest In This ETF

Earlier this month, index provider MSCI Inc. MSCI began the process of moving China A-shares, the stocks trading on mainland China exchanges in Shanghai and Shenzhen, to the prominent MSCI Emerging Markets Index.

The move is expected to affect several US-listed exchange traded funds (ETFs). One of the more unique options feeling some impact from the MSCI move is the Direxion Daily CSI 300 China A Share Bull 2X Shares CHAU.

What Happened

CHAU attempts to deliver double the daily returns of the CSI 300 Index, one of the most widely followed gauges of mainland China equities.

That index “is a modified free-float market capitalization weighted index comprised of the largest and most liquid stocks in the Chinese A-share market,” according to Direxion. “Index constituent stocks must have been listed for more than three months (unless the stock’s average daily A-share market capitalization since its initial listing ranks among the top 30 of all A-shares) and must not be experiencing obvious abnormal fluctuations or market manipulations.”

Why It's Important

MSCI is planning to over 200 A-shares stocks to the emerging markets benchmark, a theme some aggressive traders have been using CHAU to capitalize on.

Data suggest CHAU, the only leveraged A-shares ETF trading in New York, has been seeing increased activity. Over the past 30 days, CHAU is averaging daily inflows of over $366,000, according to issuer data. That is good for one of the best inflows tallies over that period among all of Direxion's bullish leveraged emerging markets ETFs.

What's Next

The A-shares making the jump to the MSCI Emerging Markets Index currently reside in an A-shares inclusion designed by MSCI, which is not the index CHAU attempts to deliver double the daily returns of. Still, that MSCI index and CHAU's underlying index feature some of the same companies.

CHAU's underlying benchmark allocates over a third of its weight to financial stocks while the industrial and consumer discretionary sectors combine for a quarter of its weight.

MSCI's inclusion will last from June through September.

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