China ** newspaper Green.
Overseas options market releases: Options linked to China** ETFs show signs that the bulls are strengthening and the shorts are weakening.
For example, information from overseas trading **Market Chameleon shows that the number of put open interest in the overseas-listed China ETF-FXI has recently signaled that the number of put open interest has fallen to a one-year low. Industry insiders explained that this indicates that the bears may gradually close their positions and leave the market. At the same time, the FXI put call ratio fell to 04. It shows that the market sentiment is gradually warming, and the power of the bulls has increased in the FXI long-short duel.
Some options linked to other China** ETFs show a similar signal.
Open interest in put options linked to FXI fell to a low level
According to the data, FXI is managed by iShares, an ETF brand under BlackRock, the world's largest asset management company, and tracks the FTSE China 50 Index. The index covers the 50 largest Chinese companies in the Hong Kong market by market capitalisation. As of November 30, 2023, the top 10 heavy stocks in the index include Alibaba, Tencent Holdings, Meituan, China Construction Bank, NetEase, Industrial and Commercial Bank of China, JD.com, Bank of China, Xiaomi Group, etc. 
*: FXi** Disclosure Materials.
Although the top 10 heavy stocks have a high content of technology and Internet, the index is not a technology or Internet index, but a broad-based index based on market capitalization.
*According to the information disclosure materials, FXI was established in 2004 and the latest scale is 442.7 billion US dollars, equivalent to about 315 yuan9.2 billion yuan. Due to the relatively early establishment time, the trading of options contracts linked to FXI is relatively active, and the corresponding trading data has also become an important sentiment indicator for overseas investors to invest in China.
*：market chameleon。
As of December 19, the open interest in call options linked to FXI was down 245%。Still, the number of calls open interest over the past 5 days is still higher than the average over the past year.
At the same time, open interest in put options linked to FXI fell by 31% over the past five days. As of now, the number of put contracts is 7798.97 million, significantly lower than the average of 1.3 million in the past year.
Let's look at the technical indicators that options traders pay more attention to: put and call ratio PCR. The decline in PCR values indicates that the market is more bullish than in the past. The rise in PCR values indicates that the bearish sentiment in the market has become stronger than in the past. The PCR, which is linked to FXi, is down 87%, the latest value dropped to 04, while the average of the past year PCR was 07。
According to a macro hedge** investor from Hong Kong, the number of call contracts linked to FXI remains at a certain level, while the number of put contracts has fallen to a one-year low. This shows that the bears may gradually close their positions and leave the market, and the market sentiment is showing signs of warming. However, he also showed that although market sentiment is warming at the margin, it is not appropriate to over-interpret a single signal.
A number of overseas options linked to China ETFs show a similar trend.
For example, the number of open interest in call options linked to the largest overseas China** ETF-MCHI has decreased by 213%。Over the same period, open interest in put options linked to MCHI decreased by 641%。PCR has dropped 54 in the past 5 days4% to 05, which is lower than the average of 1 over the past year. Similarly, the decline in PCR values indicates that market sentiment has "turned bullish".
Let's take a look at the options pegged to Alibaba (BABA). Over the past 5 days, the number of open interest in call options linked to BABA has decreased by 46%。So far, there is open interest in calls linked to BABA at 2.77 million, significantly more than the average of 1.6 million over the past year and close to the maximum of the past year.
It is worth noting that the number of put options currently open is also higher than the average over the past year. The last 5 days of PCR decline is 25% and the latest value is 04, which is lower than the average of 0 over the past year5。
The global "tech stock catcher" calls on investorsThrough fear,Return to Chinese fundamentalsRecently, Baillie Gifford, a world-renowned technology catcher with assets under management of more than one trillion yuan, published a long article expressing the view that "the Chinese market cannot be ignored".
*: Baiji article.
In the article, Bai Ji pointed out that investors should look beyond the fear and see the eight "fundamentals" of the Chinese market.
First of all, China is the world's second-largest economy and has the world's second-largest ** market. The number of investable companies (listed and unlisted) in China exceeds 6,000.
Second, in terms of company growth potential, 40% of the companies that are part of MSCI's All Countries MSCI ACWI will be from China with an annualized revenue growth of more than 20% over the next three years.
Third, Chinese companies present significant alpha opportunities for investors. Chinese companies have not been fully researched by global investors. This is also related to the company's insufficient information disclosure. In addition, the Chinese market is dominated by retail investors with shorter holding periods, which is partly a feature of the Chinese market.
Fourth, the correlation between the Chinese market and the world** is very low. This presents an opportunity for diversification of the global portfolio, which can improve the risk-return profile of the global portfolio.
Fifth, by 2030, China's overall consumer market will reach US$17 trillion, nearly double the US$9 trillion in 2019. This opens up a wide range of market opportunities.
Sixth, six of the world's top 10 EV battery manufacturers are now from China. In addition, China produces 70% of the world's solar wafers. China has more 5G base stations than the rest of the world combined.
Seventh, China has the second largest number of unicorns in the world after the United States. ByteDance is currently the largest unicorn in the world by market capitalization.
Eighth, although China's economy accounts for 20% of the world's total, Chinese companies are underweighted by global investors. For example, in the aforementioned MSCI ACWI index, Apple alone accounts for more than all Chinese companies combined. The proportion of A-shares held by foreign investors is only about 5%.
"Only China can bring about such large-scale, fundamental change".
In the midst of all these uncertainties, investors must recognize that change and disruptive breakthroughs are the forces behind investment opportunities, Baiji concludes the article. Only China can bring about such large-scale, fundamental change for global investors. In the past, China has given birth to unusual companies. Through these companies, we can get a glimpse of China's future to a certain extent.
We cannot ignore what China is showing the world. However, China does face some long-term challenges. However, we should not ignore the fact that China's technological innovation is accelerating the unleashing of power to the economy and society. The cost of renewable energy will continue to fall, battery chemistry will improve, factories will become more automated, and the young people of Gen Z will become the main consumer group. In all these areas, China is giving us a glimpse of the future.
Long-term investors like to take the time to foresee the future. In the world of the future, it is almost inevitable that China will play a more important role in the world. Global investors need to find a middle ground between fear and fear of missing out (FOMO). And how investors choose depends largely on their understanding of what China is committed to becoming. In the face of a rising country, it is understandable that people are wary of changes that cannot be made. However, this should not distract us. If fear takes over our minds, we will miss out on opportunities that we could have captured.
Editor: Xiaomo Review: Xu Wen