Chinese Stocks: Ready to Breathe Fire or Just Blowing Smoke?
Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Amidst volatility and turbulence in the U.S. stock market, there’s been a rather quiet renaissance of various names in the Chinese stock market. For years, Chinese shares have struggled to sustain a bid, but could all of the stimulus measures finally be starting to pay off?
Can Earnings and Policy Support Drive Chinese Stocks to New Heights?
We’re starting to come out of earnings season for Chinese companies, and the results have been a mixed bag. Some stocks have seen sharp moves—both up and down—based on market reactions, but the broader trend suggests earnings are still on an upward trajectory. This growth helps support the idea that a sustained recovery in China’s economy could be underway.
On the policy front, China’s central bank, the People’s Bank of China (PBOC), appears poised to maintain supportive measures—and even taking them to another level. Their keeping the gross domestic product (GDP)* growth target around 5% for 2025, and further stimulus measures are expected to be directed towards propping up domestic consumption and the housing sector.
Traders that think such stimulus measures could lead to a sustained rally in Chinese equities may find a trade with Direxion’s Daily FTSE China Bull 3X Shares (Ticker: YINN). This fund seeks daily investment results, before fees and expenses, of 300% of the performance in the FTSE China 50 Index*.
Below is a daily chart of YINN as of March 6, 2025.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.
Tariff Tensions and Economic Adjustments
For Chinese bulls, however, favorable economic data isn’t guaranteed, especially with tariff threats casting a shadow. Trade tensions between China and the U.S. remain unresolved, with potential tariff hikes still on the table at any time. Any new tariffs could drive up costs, feeding into higher inflation* down the road.
Additionally, China’s stimulus in recent years hasn’t proved as effective. Granted, they’ve taken it to another level recently, but if the market doesn’t find it to be enough, then we could see the longer-term downtrend continue to the downside.
And if domestic consumption can’t offset decreased exports as a result of tariffs, it may struggle to produce economic growth. The next GDP report is slated to be released in mid-April, and if recent stimulus doesn’t prove to generate results, it may be an opportunity for bears to capitalize again.
Traders seeking to protect themselves from these potential bearish developments may find a trade with Direxion’s Daily FTSE China Bear 3X Shares (Ticker: YANG), which seeks daily investment results, before fees and expenses, of 300% of the inverse performance in the FTSE China 50 Index.
Below is a daily chart of YANG as of March 6, 2025.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A 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. A Fund’s prospectus and summary prospectus should be read carefully before investing.
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.
The FTSE China 50 Index (TXIN0UNU) consists of the 50 largest and most liquid public Chinese companies currently trading on the Hong Kong Stock Exchange as determined by FTSE/Russell. Constituents in the Index are weighted based on total market value, so that companies with larger total market values will generally have a greater weight in the Index. Index constituents are screened for liquidity and weightings and are capped to limit the concentration of any one stock in the Index. One cannot invest directly in an index.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. A Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.
Leverage Risk – Each Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation or inverse correlation with the Index and may increase the volatility of the Fund.
Daily Index Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.
Daily Inverse Index Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse leveraged investment objective. The Bear Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.
Chinese Securities Risk – Chinese securities are subject to the risks of government involvement, concentrated issuers, more frequent trading halts, low volume and volatility, higher dept levels, less-developed laws and regulations, being export driven and highly reliant on trade as well as security concerns, such as terrorism and strained international relations.
Financials Sector Risk — Performance of companies in the financials sector may be materially impacted by many factors, including but not limited to, government regulations, economic conditions, credit rating downgrades, changes in interest rates and decreased liquidity in credit markets.
Consumer Discretionary Sector Risk — Companies in the consumer discretionary sector are tied closely to the performance of the overall domestic and international economy, including the functioning of the global supply chain, interest rates, competition and consumer confidence.
Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, Passive Investment and Index Performance Risk as well as Emerging Markets Risk, and for the Direxion Daily FTSE China Bear 3X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.