The Chinese market has reaped phenomenal returns over the past several years. Three of the world's top five most valuable firms are now Chinese. But these lofty valuations may be an indication that the China doll is about to break. For those who believe that the froth in this market has reached a critical point, there's a new ETF that might help investors profit from a downturn.

China short
Last week, ProShares launched the UltraShort FTSE/Xinhua China 25 ETF (AMEX:FXP). The fund looks for daily investment results that correspond to twice the inverse of the daily performance of the FTSE/Xinhua China 25 Index, which is composed of the 25 largest and most liquid stocks on the Hong Kong Exchange. So if the index falls by 1%, the fund should rise in value by 2%.

The fund has most of its sector exposure in financials, followed by energy and communications. Leaders include China Mobile (NYSE:CHL), the largest mobile phone operator in China; China Life (NYSE:LFC), the world's second-largest insurer by market cap; and Petrochina (NYSE:PTR), the first company ever valued at a market cap of more than $1 trillion.

Expect volatility
Hong Kong's currency is pegged to the U.S. dollar, which has helped contribute to a recent pullback by that market in concert with the U.S. downturn. This fund is designed to be more volatile and riskier than most funds, so an investment in this ETF is only for those who are comfortable with such variability in returns. The fund has a high expense ratio of 0.95%, but when you consider that you can short 25 securities in the high-priced China market with one transaction, that doesn't seem too pricey.

At the moment, I think China is overvalued. However, this is a vibrant and rapidly growing economy, which means that any market retreat will likely be only temporary. If that proves true, this ProShares fund will only be suitable for short-term trades.

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Fool contributor Zoe Van Schyndel lives in Miami and enjoys the sunshine and variety of the Magic City. She does not own any of the funds or securities mentioned in this article. China Mobile is a former Global Gains recommendation. The Motley Fool has a disclosure policy.