According to data from overseas trading website Marketchameleon, the trading volume of call options in iShares China Large Cap ETF (FXI), which tracks Chinese stocks through overseas pegs, has surged in the past week, reaching its highest point in over a year.
Note: The recent trend of FIX option trading volume is represented by the yellow and blue lines, which represent the call (long) volume and put (short) volume, respectively
Stimulated by positive news, the A-share and Hong Kong stock markets have rebounded continuously since Tuesday, with the Hang Seng Index rising 6.62% from Tuesday to Friday, and the Shanghai Composite Index rising 5.58% in four days.
According to analysis, after the recovery of A-share and Hong Kong stock markets this week, overseas investors may be catching up with the rebound of Chinese assets by being bullish on FXI options.
According to research by China Merchants Securities, iShares China's large cap ETF tracks the FTSE China 50 Index as the underlying index. From the perspective of constituent stocks, it mainly holds Chinese large cap stocks on the Hong Kong Stock Exchange, with the main weighted stocks being Alibaba Hong Kong stocks (9.2%), Tencent (8.7%), CCB H stocks (7.4%), Meituan (7.0%), and ICBC H stocks (4.7%).
It is worth noting that since entering January, FXI's option holdings have experienced multiple fluctuations, with the proportion of long positions continuously reaching new highs.
According to China Merchants Securities tracking, the total trading volume of FXI options surged to 500000 contracts on January 9th, with call options trading volume reaching 405000, accounting for over 80%. The interval between reaching the same level of activity as the previous option is less than a month.
Just half a month later, the trading volume of FIX call options reached a new high this week, with call options accounting for a maximum of 86%.
China Merchants Securities previously stated that the increase in call option holdings itself does not indicate direction. However, historically, when call option holdings reach a relatively high point, their tracking target, the FTSE China A50 Index, often experiences a significant rebound.
In addition, Li Meicen, an analyst at Caitong Securities, also stated in a report on January 13th that the short-term significant increase in FIX call option holdings may indicate that external market confidence in A-shares is also recovering.
