China’s Stimulus Fuels $138 Million Paper Gains for ETF Traders

Traders who placed bullish bets on small, leveraged ETFs tracking Chinese indexes have reaped massive gains after a rally in Chinese equities. The Direxion Daily FTSE China Bull 3x Shares (YINN) surged 29%, and the Direxion Daily CSI 300 China A Shares Bull 2x Shares (CHAU) jumped 16% Monday, fueled by Beijing’s signal of expanded monetary stimulus in 2025. The bets, which involved nearly $225 million in call options, are now worth approximately $138 million in paper profits, Bloomberg calculations show. Unusually large purchases of long-dated options began on Nov. 29 and included 180,000 January 2026 $27 calls on YINN and 210,000 May $15 calls on CHAU. The trades reflect optimism over China’s shift from a “prudent” monetary strategy to a more accommodative stance, with expectations of interest-rate cuts and significant fiscal measures to boost the economy. Analysts believe these steps could reignite interest in China assets after years of underperformance. Market Overview:

• YINN surged 29%, and CHAU gained 16% Monday amid stimulus signals.
• Bullish options on these ETFs resulted in $138 million in paper profits.
• Chinese policy shift includes “moderately loose” monetary measures for 2025.

Key Points:

• Unusual call buying began Nov. 29, targeting YINN and CHAU ETFs.
• Beijing’s Politburo signals policy changes, driving a rally in China stocks.
• Evercore ISI expects strong fiscal support in March’s NPC meeting.

Looking Ahead:

• China’s monetary easing may continue to boost investor confidence.
• Traders eye further gains as stimulus measures roll out in 2025.
• ETFs and ADRs tracking Chinese stocks likely to see sustained interest.

China’s latest economic signals have rekindled enthusiasm for its markets, rewarding traders who bet early on policy shifts. Analysts at Evercore ISI see unprecedented support for China’s economy, including a higher deficit ratio, expanded local government bond quotas, and significant ultra-long sovereign bonds. These developments set the stage for sustained investor engagement with Chinese equities in 2025. With speculative positions concentrated in leveraged ETFs like YINN and CHAU, market participants demonstrate growing confidence in China’s recovery. The focus will now turn to the annual NPC meeting in March, where further fiscal measures are expected, potentially fueling additional gains for U.S.-listed Chinese ETFs and ADRs.

This article contains syndicated content. We have not reviewed, approved, or endorsed the content, and may receive compensation for placement of the content on this site. For more information please view the Barchart Disclosure Policy here.