China Ultra Short ETF Launched by ProShares

ProShares launches Thursday an exchange-traded fund that moves inversely to a well known index of 25 "H" shares of Chinese companies that trade on the Hong Kong stock exchange. The UltraShort FTSE/Xinhua China 25 ProShares (FXP) seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the FTSE/Xinhua China 25 Index. It has an expense ratio of 0.95%.

The iShares FTSE/Xinhua 25 ETF (FXI) fell almost 10% on Monday after China effectively reversed itself by pulling back a proposal to allow mainland citizens to buy shares in Hong Kong. On Tuesday it rebounded but Wednesday brought more selling pressure as it lost another 4.8%. FXI is still probably the best way to get at Chinese companies. FXI contains 25 of the largest and most liquid Chinese companies available to international investors and all the shares trade on the Hong Kong Stock Exchange. Eight of the largest ten companies in the index are H-shares and they collectively account for 46% of the index.

FXP needs to be used carefully since it magnifies movements in the index. Another option to hedge China exposure is to purchase a put option on FXI.