Outlook for ProShares’ New Inverse ETFs: China, Real Estate, Materials

Includes: REK, SBM, YXI
by: Tom Lydon

Are you pessimistic about the markets and expect a pullback in the near future? Well, ProShares is now offering three new single inverse ETFs that target China, real estate and basic materials.

The new ETFs try to reflect the single inverse, or -100%, performance of the FTSE/Xinhua China 25 Index, or to the Dow Jones U.S. Real Estate or U.S. Basic Materials Indexes. It should be noted that Ultra and Short ProShares ETF were designed to reflect the returns of an index or other benchmark for a single day.

China. Prices in the country rose 2.7% last month from a year earlier. There probably won’t be a shift in economic policy, according to economists, but Chinese consumers might see a hike in loan rates in an attempt to tamp out inflation. That could, in turn, slow China’s growth.

ProShares Trust Short FTSE/Xinhua China ETF (NYSEARCA:YXI). FXI has 25 holdings and an expense ratio of 0.95%.

Top holdings include: China Mobile Ltd. 9.4%, China Construction Bank-Class H 8.9%, China Life Insurance Co.-Class H 8.7% and Industrial & Commercial Bank of China-Class H 7.3%.

Top sectors include: Financial 46.9%, Energy, 20.2%, Communications, 16.7% and Industrial 8.9%.

Real Estate. Although February’s home sales fell 0.6% last month from January – less bad than economists had anticipated – it’s being taken as a signal that the housing market is still in a slump that won’t abate anytime soon. Case in point: today’s news that new home sales tanked to a record low last month. It can’t be good when buyers can’t even be goaded with government tax credits or low, low mortgage rates. One positive: the rate of decline has slowed, and that’s something.

ProShares Trust Short Real Estate ETF (NYSEARCA:REK). REK has 75 holdings and an expense ratio of 0.95%.

Top holdings include: Simon Property Group Inc. (NYSE: SPG) 9%, Vornado Realty Trust (NYSE: VNO) 5%, Public Storage (NYSE: PSA) 4.2% and Annaly Capital Management Inc. (NYSE: NLY) 3.8%.

Basic Materials. The news from China also hit the materials sector as investors question what monetary tightening would mean for demand for raw goods and other items China has been gobbling up for the last year-plus.

ProShares Trust Short Basic Materials (NYSEARCA:SBM). SBM has 68 holdings and an expense ratio of 0.95%.

Top holdings include: Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) 8.5%, Dow Chemical Co. (NYSE: DOW) 8.2% and E.I. DuPont de Nemours & Co. (NYSE: DD) 7.4%.

Sectors include: Chemicals 51.7%, Industrial Metals 26.8%, Mining 18% and Forestry and Paper 3.5%.

Max Chen contributed to this article.

Disclosure: None