东升西降，小白如何在美股市场做多中国？

Amidst the sharp rise in the Chinese stock market, on Thursday, a new ETF tracking the performance of large Chinese companies, called "China Dragon", debuted on the US stock market. The full name of this ETF is The Roundhill China Dragons ETF (DRAG), DRAG aims to track an equally-weighted basket of stocks composed of 5 to 10 of the largest and most innovative Chinese technology companies, including Tencent, Pinduoduo, Alibaba, Meituan, BYD, Xiaomi, JD.com, Baidu, and Netease, The issuer collectively refers to these companies as the "China Dragon".

Roundhill Investments stated that at the time of launch, the aforementioned 9 super large technology companies show significant strength in economies of scale, solid fundamentals, and growth compared to peers, demonstrating competitive advantages.This ETF will be rebalanced quarterly. Dave Mazza, the CEO of the company, mentioned that the key difference of DRAG from other ETFs providing exposure to China, such as the $7.9 billion KraneShares CSI China Internet ETF (KWEB) and the $6.4 billion iShares Core MSCI China ETF (FXI), lies in its concentration.

The fee rate of DRAG is 0.59%, slightly lower compared to most similar ETFs.

In fact, there are many ETFs in the US stock market that target Chinese assets, with the more well-known ones being Yin (YINN) and Yang (YANG). Interestingly, the Chinese " Yin and Yang".The word "YIN" has long represented upward, while "YANG" more often represents downward. When listening to someone boasting about technical analysis, you often hear a master say a long positive candlestick, indicating a big rise. However, these two brothers are the other way around,YINN Yin is long, YANG Yang is short, beginners should never get it wrong.

Let's first take a look at YINN.

YINN, Direxion Daily FTSE China Bull 3X Shares, aims to track the daily performance of the FTSE China 50 Index before fees, reflecting 300% of the index's performance. The index is composed of the 50 largest and most liquid Chinese listed companies currently traded on the Hong Kong Stock Exchange. This fund does not engage in diversified investment.

Code: YINN

Full Name: Direxion Daily FTSE China Bull 3X ETF

Establishment Date: December 3, 2009

Exchange: New York Stock Exchange (NYSE)

Associated Index: FTSE China 50 (FTSE China 50)

Trading Currency: USD

Issued Shares: 0.6 billion

Assets Under Management: $1.171 billion

Trading Volume: 35.64 million shares

Turnover ratio: 44.49%

Number of holdings: 50

As YINN is a leveraged ETF, attention needs to be paid to the key words 'daily' and 'before deducting fees', so its expected return is three times the single-day return of its benchmark index, and one should not expect these funds to provide three times the cumulative return of the benchmark index beyond one day.

For leveraged ETFs, they rely on a series of derivatives contracts and swaps to achieve amplified volatility, so the analysis of their own holdings is not valuable. What we need to focus on is the holdings of the FTSE China 50 Index tied to underlying income.

The FTSE China 50 Index refers to the FTSE China 50 Index (note that this A50 is different from the domestic FTSE China A50), calculated by FTSE Russell, including 50 of the largest and most liquid Chinese stocks, including H-shares, red chips, and P-shares, all listed on the Stock Exchange of Hong Kong (SEHK).

The components of the FTSE China 50 Index are selected based on market cap and liquidity. This means that selected companies not only need to have a large market cap, but also good trading liquidity to ensure the index accurately reflects the overall market performance. At the same time, to avoid over-concentration in any single stock, the upper limit of each component stock's weight is set at 9% (but not adjusted in real-time, any excess will be adjusted annually). This weight limitation helps diversify risk, ensuring that the index performance is not unduly influenced by the extreme fluctuations of a single stock.

The components of the index are not fixed, but undergo an annual routine review and adjustment to ensure the inclusion of the most representative and influential companies in the market. This rigorous screening and updating process ensures the vitality of the index and its sensitivity to market changes.

For investors seeking to invest in the Chinese stock market, the FTSE China 50 Index is not only an important reference index, but also a barometer reflecting market trends. As its components are all industry leaders, this index is often seen as a benchmark for the Chinese stock market. By observing the trend of this index, investors can discern the direction of the Chinese stock market and provide strong support for their investment decisions.

If you directly buy YINN, it is equivalent to three times bullish on China, with outstanding effects.

The so-called leverage wear and tear. Assuming the initial net value is 1, investors buy 1000 shares of YINN for $1000, using three times leverage, hence the financing amount is $2000, total assets $3000. If the FTSE China 50 rises by 5% that day and YINN rises by 15%, the total assets become $3150 (3000*1+5%), deducting the $2000 financing (even if financing costs and management fees are not calculated here yet), the net assets are $1150, and the unit net asset value at the end of the first day is $1.15.

As leveraged ETFs have a daily rebalancing mechanism to ensure that the next day's tracked price is still 15% higher than the previous day, financing is then done at three times the latest net assets, which is $3450. If the index falls by 5% the next day with YINN also dropping 15%, total assets become $3277.5, deducting $2300 financing, the net assets are $977.5, meaning the unit net asset value at the end of the second day is 0.9775.

For the underlying index being tracked (FTSE China 50), the net asset value at this time is 1*1.05*0.95 = 0.9975, representing a -0.25% return. However, at this point, YINN's return is already -2.25%, resulting in a wear and tear cost of 1.5% relative to the three times the base index's return change of -0.75%.

If the large-cap index continues to fluctuate in the near term, it means that you will continue to bear leveraged wear and tear, as well as trading costs such as financing interest. The ultimate outcome is that during this period where the index does not show significant fluctuations, investors holding leveraged ETFs will experience a continuous decline in net assets.

However, if encountering a one-way market, holding leveraged ETFs can also.Amplify your earnings.。

For example, changing the above assumption, if the index continues to rise by 5% the next day, and YINN rises by 15% on the same day, the total assets will be 3450*(1+5%) = 3622.5 US dollars. After deducting the financed 2300 US dollars, the net assets will be 1322.5 US dollars, that is, the net asset value at the end of the second day will be 1.3225.

For the underlying index being tracked (FTSE China 50), the net asset value at this time is 1*1.05*1.05 = 1.1025, a return rate of 10.25%. However, at this time, the return rate of YINN is already 32.25%, compared to the change in return of the three times basic index (30.75%), the erosion cost becomes a "erosion gain" of 1.50%.

Although there are indeed some special years when the index rises quickly in one direction, leading to a faster expansion of returns for leveraged ETFs.

Just this week, the four largest ETFs listed in the United States related to the Chinese stock market have already seen an inflow of 2.5 billion US dollars, with KraneShares' KWEB recording the largest single-day inflow of funds in history on Tuesday. Fund managers and hedge funds are pouring into the Chinese stock market at a record pace. If you also want to benefit from this trend, it is better to monitor the mentioned US stocks and ETFs on compliant US trading platforms, such as Charles Schwab, Interactive Brokers, BiyaPay, etc., to promptly spot opportunities and take action decisively at the right time.