Direxion, a US-based provider of short and leveraged exchange-traded funds, has launched four new products linked to US home-building and residential mortgage lending on the NYSE Arca.
The Direxion Daily Homebuilders & Supplies Bull 3x Shares ETF (NAIL) and the Direxion Daily Homebuilders & Supplies Bear 3x Shares ETF (CLAW) provide triple the daily return and triple of the daily inverse return of the Dow Jones US Select Home Construction Index respectively, while the Direxion Daily Regional Banks Bull 3x Shares ETF (DPST) and the Direxion Daily Regional Banks Bear 3x Shares ETF (WDRW) provide triple the daily return and triple of the daily inverse return of the Solactive US Regional Bank TR Index respectively.
The S&P/Case Shiller House Price Indices indicate robustness in the housing market.
“Our interaction with clients tells us that there is significant interest among investors for trading in the home construction and regional bank sectors,” said Sylvia Jablonski, Managing Director at Direxion. “These leveraged ETFs allow traders to express a bold point of view on these sectors, in either direction, at a time when the markets are digesting significantly changing dynamics for interest rates, growth and international developments.”
The Dow Jones US Select Home Construction Index is comprised of 41 stocks which represent providers of a wide variety of homebuilding products and services. The current sector weightings of the fund include homebuilding (66.2%), building products (14.6%), home improvement retail (8.2%) and home furnishings (4.3%). Most concentrated constituents of the index include DR Horton (11.7%), Lennar (11.3%), PulteGroup (8.4%), Toll Brothers (7.8%) and NVR (7.3%). The average market cap of constituents within the index is $9.2bn.
The US housing market is looking robust according to recent research presented by the S&P/Case-Shiller Home Price Index Series. The most recent report, which covers activity from May 2015, highlights the continuation of house price increases across the country which has persisted for the last 12 months. Specifically, year-over-year, the 10-City Composite was up 4.7%, the 20-City Composite was up 4.9%, and the US National Home Price Index was up 4.4%. The best performing cities were Denver (up 10.0%), San Francisco (up 9.7%) and Dallas (up 8.4%).
“As home prices continue rising, they are sending more upbeat signals than other housing market indicators,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Nationally, single family home price increases have settled into a steady 4%-5% annual pace following the double-digit bubbly pattern of 2013.”
The Solactive US Regional Banks TR Index tracks the performance of the 50 largest regional banks in the US. It is equally-weighted, allowing for further diversification versus a market-cap approach and providing a bias towards the smaller sized banks in the index.
Regional Banks in the US have performed well this year. The iShares US Regional Banks ETF (IAT) is up 5.6% year-to-date (19 August 2015).
Banks are expected to be among the group of winners from a rise in interest rates when the Federal Reserve decide to hike the federal funds rate. By increasing the spread between loans and payments on deposits, banks are able to increase their gross profit margins. Furthermore, rising rates signal better health in the economy and a lower probability of delayed payments and defaults.
The four funds carry a total expense ratio of 0.95%.