Many investors from China are piling into the products which provide a hedge against the collapse of a stock, convinced by now that the U.S.-China trade dispute will drag on and might even intensify.
Any hopes of a trade deal have been dashed away by this month’s dramatic ending of a month-long truce between Washington and Beijing, and the investors are preparing themselves for even more bad news, for example further sanctions on the Chinese companies, pressurizing the rating agencies for downgrading the credit ratings of China and even moves for increasing the price of oil.
Investors have been positioning for such tail risks in tools like products of options and exchange-traded which make money in case of the stock market’s fall. They have also been making efforts to drive cash into gold as well as safe-haven bonds.
The amazing contracts of the Chinese put equity options that are a form of insurance against the drop in SSE50 index of Shnaghai have increased to a record 1.5 million during this week. Remarkable contracts in the future of Chinese stock index which is yet another risk-hedging instrument hit the highest of this year.
In Hong Kong, funds that have been leveraged and inverse traded by the exchange which are meant for rewarding investors in case the market collapses, have observed record buying. A product of inverse fund that was managed by the CSOP Asset Management and allows investors to able to capitalize on the negative aspect of the benchmark Hang Seng observed a record turnover as well as an increase in assets under management (AUM). The risk-off sentiment also driven net inflows into the money market funds of the CSOP.