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Discounted Closed End Funds – Is China Cheap?


ETFConnect offers some great sorting capabilities as well as some of the best information around for exchange traded and closed end funds.  Closed end funds trade partially on the underlying value of the assets and partially on what the market will pay.  For this reason, CEF’s can trade at a premium or discount to their NAV (net asset value).  ETFConnect offers a nice sort feature to see the CEF trading at the largest discount to NAV.  Have a look at the entire list here.
It’s an interesting list and what stands out most to me is that a few of the China funds are currently trading at significant discounts.  The Morgan Stanley China A Shares Fund (CAF) is trading at a 29% discount!  Also trading at a discount is the Templeton Dragon Fund (TDF) at 15.63%, the China Fund (CHN) at 15.39% and the JF China Region Fund (JFC) at 14.47%.


Using Leveraged ETF’s to Short/Hedge

With the market getting into overbought conditions and big resistance areas still in the way, I thought it would be a good time to review some of the most liquid leverage short ETF’s.  You want to stick with the most liquid ETF’s (those that trade at least a few hundred thousand shares a day)  to avoid getting hurt on the spread between the bid and the ask.  All of the ETF’s are leveraged 2x to short side.  For example the Nasdaq Ultra Short ETF (QID) seeks to return twice the inverse of the QQQQ.  So if the QQQQ drops 2%, the QID will return a profit of roughly 4%.

The best leveraged short ETF’s in order of liquidy are:

Nasdaq Ultra Short (QID) trades about 26 million shares a day
S&P Ultra Short (SDS) trades about 13.8 million shares a day
Dow Ultra Short (DXD) trades about 3.8 million shares a day
Russell 2000 Ultra Short (TWM) trades about 2.6 million shares a day
MidCap 400 Ultra Short (MZZ) trades about 580 thousand shares a day
Financials Ultra Short (SKF) trades about 577K shares a day
Real Estate Ultra Short (SRS) trades about 552K shares a day
Oil & Gas Ultra Short (DUG) trades about 202K shares a day

Do keep in mind these are leveraged funds, so carry more risk and more reward!