Going long and short in the volatile Chinese market has just become easier for money managers.

The Hang Seng Indexes Co. has launched six new indexes that use leverage and take short positions in the Hang Seng Index and the Hang Seng China Enterprises Index.

The new Hang Seng index series includes four short indexes. Two offer a straight one-to-one short position on either the HSI or the HSCEI. The other pair do the same with 1x and 2x versions for both the HSI and HSCEI.

The series also includes two leveraged indexes; one for the HIS and another for the HSCEI.

The Hong Kong-based bank said the indexes will serve as the basis for exchange-traded products and institutional benchmarks.

There are many indexes targeting the Chinese market, and there are a host of China ETFs based on these benchmarks.

However, most have been co-branded with Western index providers, such as the FTSE/Xinhua China 25 Index, or structured using ADRs, such as the Bank of New York Mellon China Select ADR Index. The local brand of Hang Seng makes it unique, and that is only enhanced by the fact that there are relatively few index competitors specifically offering long and short China benchmarks.

Distinguishing Factor 

The major difference between the HSI and FTSE/Xinhua 25 is the number of stocks held in the index: HSI has a total of 40 stocks, versus the Xinhua's total of 25. MSCI Barra, Dow Jones and Standard & Poor's all offer China benchmarks, including sector plays, but none has created levered or short versions.

In the U.S. ETF market, there are a few funds that lever and short China. Direxion Funds offers 2X long and 2X short China ETFs based on the FTSE/Xinhua index, while ProShares offers a shorting ETF, also based on the FTSE/Xinhua China 25.

In the unleveraged category, the basis for ETFs has similarly lacked the local flavor of Hang Seng, or been co-branded. The SPDR S&P China ETF is structured on the S&P/Citigroup BMI China Index. iShares offers funds based on the FTSE China Index, FTSE/Xinhua China 25 and MSCI Hong Kong Index.

PowerShares uses a China index created by a U.S. financial firm, Halter Financial Group, for its Golden Dragon fund, while AlphaShares created its own index for its China Small-Cap Index ETF. 

Alone in the U.S. in offering ETFs based on both of the original Hang Seng indexes is Northern Trust's NETS ETF fund family.

In the Chinese market, the Hong Kong bank's investment arm, Hang Seng Investment Management, already offers ETFs based on the HSI and HSCEI indexes, as well as an FTSE/Xinhua China 25 Index ETF.

The introduction of the new indexes comes amidst intense volatility in the Chinese market. This year, major China indexes are down as much as 50%, after years of riding the Great Wave of China growth. It also comes during a period in which the ETF marketplace has continued to see an increased flow of assets to non-U.S. equity-linked investments.