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    Hong Kong's drawing a crowd of skeptics

    Synopsis

    Volume of bearish options on Hong Kong's benchmark gauge jumps.

    Bloomberg
    HONG KONG: Even as Hong Kong shares are holding on to their eighth straight monthly gain, recent derivatives activity shows investors are getting jittery about Asia's best-performing market this year.

    Bearish options volume on the HangSeng Index is heading for its highest level since August 2011 this month, with the ratio of outstanding puts versus bullish calls near a 10-year peak. The hedging is happening as the benchmark gauge surged 25% since January, reaching a more than two-year high August 8.

    While a stabilising Chinese economy and brighter earnings prospects have helped lift the Hang Seng Index, gains concentrated in some heavy-weight stocks such as Tencent Holdings Ltd are raising concerns they may turn into pitfalls. And the growing tension surrounding North Korea and worries over the impact of US President Donald Trump's administration on Asian shares have prompted investors to hedge, according to Hao Hong, chief strategist at Bocom International Holdings Co.

    “There is just so much uncertainty in a market that is at a very high level,“ Hong said in a phone interview from Hong Kong. “Right now all the options are being priced at low-volatility levels, so if you load up on options now, when volatility increases you can use that to benefit.“

    Stock swings remain below their five-year average, even though the HSI Volatility Index has rebounded 40% from a low in July. As the strength of the equity rally eased this month, almost 30,000 Hang Seng Index bearish options changed hands on average each day, compared with about 19,500 bullish ones.



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    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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