We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Rate Cuts & Trade Hopes: Tap Leveraged China ETFs for Quick Gains
Read MoreHide Full Article
China’s central bank and financial regulators announced a broad package of stimulus measures on Wednesday, indicating efforts to support economic growth amid rising trade tensions. The People’s Bank of China (PBOC) will now cut the seven-day reverse repurchase rate by 10 basis points, lowering it from 1.5% to 1.4%, Governor Pan Gongsheng confirmed at a press briefing, as quoted on CNBC. This move is expected to bring down the loan prime rate by a similar margin.
In addition, the central bank will reduce the reserve requirement ratio (RRR) for banks by 50 basis points, freeing up around 1 trillion yuan ($138.6 billion) in liquidity. The rate cuts take effect Thursday, while the RRR cut will be implemented on May 15, according to state news agency Xinhua, quoted on CNBC.
Targeted Support for Key Sectors
Real Estate and Housing: Mortgage rates under the government-backed housing provident fund will be reduced by 25 basis points. First-time homebuyers will see five-year loan rates drop from 2.85% to 2.6%.
Auto Financing: The reserve requirement for auto financing firms will gradually be lowered to zero from the current 5%.
Consumption and Elderly Care: A 500-billion-yuan relending tool will be established to support spending in these sectors.
Further Policy Support in the Pipeline
Financial Regulatory Administration chief Li Yunze said additional measures targeting small and medium enterprises, as well as private businesses, are forthcoming. These efforts aim to cushion the blow from rising tariffs and bolster employment.
Meanwhile, China confirmed that Vice Premier He Lifeng will meet U.S. Treasury Secretary Scott Bessent in Switzerland later this week.This marks the first confirmed trade dialogue since the United States, under President Trump, sharply raised tariffs on Chinese imports to 145%. The upcoming meeting could signal a potential thaw in trade tensions.
Long-Term Stock Rally Possible?
As of now, this stimulus is less likely to instigate a long-term equity rally.Tianchen Xu, senior economist at the Economist Intelligence Unit, noted that borrowing in China has shown limited sensitivity to interest rate changes, as quoted on CNBC.
While monetary policy has been eased, significant new fiscal stimuli have been absent.However, policymakers have reiterated that they have sufficient tools for “worst-case scenarios.”
Time for Short-Term Trade?
Given the recent rate cut announcement and trade optimism, investors may choose to play leveraged China exchange-traded funds (ETFs) with a short-term view, to earn some quick gains.
Direxion Daily CSI China Internet Index Bull 2x Shares (CWEB - Free Report) – Up 11.9% past week
Direxion Daily FTSE China Bull 3X Shares (YINN - Free Report) – Up 12.2% past week
ProShares Ultra FTSE China 50 (XPP - Free Report) – Up 8.3% past week
Direxion Daily CSI 300 China A Share Bull 2x Shares (CHAU - Free Report) – Up 4.8% past week
Bottom Line
Investors should note that these leveraged products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing, when combined with leverage, may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Equity ETFs here).
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Rate Cuts & Trade Hopes: Tap Leveraged China ETFs for Quick Gains
China’s central bank and financial regulators announced a broad package of stimulus measures on Wednesday, indicating efforts to support economic growth amid rising trade tensions. The People’s Bank of China (PBOC) will now cut the seven-day reverse repurchase rate by 10 basis points, lowering it from 1.5% to 1.4%, Governor Pan Gongsheng confirmed at a press briefing, as quoted on CNBC. This move is expected to bring down the loan prime rate by a similar margin.
In addition, the central bank will reduce the reserve requirement ratio (RRR) for banks by 50 basis points, freeing up around 1 trillion yuan ($138.6 billion) in liquidity. The rate cuts take effect Thursday, while the RRR cut will be implemented on May 15, according to state news agency Xinhua, quoted on CNBC.
Targeted Support for Key Sectors
Real Estate and Housing: Mortgage rates under the government-backed housing provident fund will be reduced by 25 basis points. First-time homebuyers will see five-year loan rates drop from 2.85% to 2.6%.
Auto Financing: The reserve requirement for auto financing firms will gradually be lowered to zero from the current 5%.
Consumption and Elderly Care: A 500-billion-yuan relending tool will be established to support spending in these sectors.
Further Policy Support in the Pipeline
Financial Regulatory Administration chief Li Yunze said additional measures targeting small and medium enterprises, as well as private businesses, are forthcoming. These efforts aim to cushion the blow from rising tariffs and bolster employment.
Lynn Song, chief economist for Greater China at ING, believes additional policy easing is still possible due to deflationary pressures and slowing growth, as quoted on CNBC.
Trade Talks on the Horizon
Meanwhile, China confirmed that Vice Premier He Lifeng will meet U.S. Treasury Secretary Scott Bessent in Switzerland later this week.This marks the first confirmed trade dialogue since the United States, under President Trump, sharply raised tariffs on Chinese imports to 145%. The upcoming meeting could signal a potential thaw in trade tensions.
Long-Term Stock Rally Possible?
As of now, this stimulus is less likely to instigate a long-term equity rally.Tianchen Xu, senior economist at the Economist Intelligence Unit, noted that borrowing in China has shown limited sensitivity to interest rate changes, as quoted on CNBC.
While monetary policy has been eased, significant new fiscal stimuli have been absent.However, policymakers have reiterated that they have sufficient tools for “worst-case scenarios.”
Time for Short-Term Trade?
Given the recent rate cut announcement and trade optimism, investors may choose to play leveraged China exchange-traded funds (ETFs) with a short-term view, to earn some quick gains.
Direxion Daily CSI China Internet Index Bull 2x Shares (CWEB - Free Report) – Up 11.9% past week
Direxion Daily FTSE China Bull 3X Shares (YINN - Free Report) – Up 12.2% past week
ProShares Ultra FTSE China 50 (XPP - Free Report) – Up 8.3% past week
Direxion Daily CSI 300 China A Share Bull 2x Shares (CHAU - Free Report) – Up 4.8% past week
Bottom Line
Investors should note that these leveraged products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing, when combined with leverage, may make these products deviate significantly from the expected long-term performance figures (see: all the Leveraged Equity ETFs here).