Direxion Daily FTSE China Bull 3X Shares

YINN

Market cap $934M

Despite mounting macro headwinds at the start of the year, Chinese equities have continued to deliver positive performance. While near-term flows can provide further upside, the durability for the equity rally will hinge on policy choices ahead.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.

Despite recent optimism, I am cautious on large-cap Chinese equities due to ongoing trade uncertainty and headline risks. Leveraged ETFs like YINN are generally unsuitable for long-term investors, as volatility drag and high expenses erode value over time. Chinese stocks have rallied sharply, but structural issues including debt, demographics, and trade tensions cloud the long-term outlook.

As seasoned investors already know, the 24-hour news cycle can change markets quickly and swiftly. After weathering the tariff tantrum storm, downtrodden Magnificent Seven stocks are starting to look magnificent again thanks to U.S.-China trade deal news, but caution is always warranted.

Taking into account a U.S/China trade war that may be on pause, but far from resolved, China stocks could provide traders with an opportune entry point and resume their rally. Volatility in China equities is certainly not a new phenomenon.

China's central bank and financial regulators announced a broad package of stimulus measures. Meanwhile, China is meeting with the United States this week in Switzerland for trade talks.

Understanding the construction and purpose of financial instruments is crucial to avoid misusing them and potentially losing money. The Direxion Daily FTSE China Bull 3X Shares ETF (YINN) is designed for short-term trading, not long-term investment. Leveraged ETFs like YINN are suitable for speculation or hedging but suffer from performance degradation over time due to their derivative-based construction.

Trade wars continue to fuel sell-offs in U.S. equities, pushing the S&P 500 down further. The optimism heading into 2025 is giving way to market uncertainty as the post-election rally in November 2024 has lost its momentum.

The U.S. stock market saw wild swings, while international markets experienced a smooth ride in the first quarter.

In a market brimming with uncertainty, investors are seeking ways to diversify from their core equities portfolio. One of the ways is seeking international opportunities, highlighting the benefits of international diversification.