BEIJING: Even though gauges of equity volatility have been low across the world, hedging against stock swings hasn’t been that cheap. Except in China. The Hang Seng China Enterprises Index’s one-month implied volatility — or bets on fluctuations to come — is at about the same level as actual price moves over the past 20 trading days, indicating that investors pay virtually no premium to protect against future equity moves.
That’s very different from the trend seen in other markets. In the U.S., the premium is above its annual average, while in Europe, where investors are positioning ahead of the French presidential elections, implied volatility is more than double realized price moves. In other Asian markets including Japan, Korea, India and Australia, the cost of hedging against fluctuations is either in line with its mean or more expensive. “Market comments — buy-side, sell-side — seem much more comfortable with the outlook for China now,” said Tony Hann, the head of equities at London-based Blackfriars Asset Management Ltd. “The risks in China have diminished by the margin, although they are still there. There’s a potential friction point if Trump decides to try to label China as a currency manipulator.”
