Investors in U.S.-listed exchange traded funds focusing on China are showing optimistic options activity ahead of President Joe Biden’s meeting with Chinese President Xi Jinping, signaling a hope for a resolution of trade friction between the two superpowers. The bullish options includes call options on the Xtrackers Harvest CSI 300 China A-Shares ETF with a $27 strike price and similar options for the iShares Trust-China Large-Cap ETF, amid broader interest in China-focused ETFs. Although this seems at odds with how the ETFs have performed this year, with many down several percentage points, bullish options flow on Chinese e-commerce companies JD.com and Alibaba are also adding to the optimistic outlook as results from both companies look favorable.
The focus on bullish positions in Chinese ETFs is being propelled by the upcoming Biden-Xi meeting and the hope for a positive outcome, illustrating investors’ nascent enthusiasm for Chinese stocks, albeit at odds with the year’s performance of these ETFs, which is down in comparison to the S&P 500. This enthusiasm is being further fueled by optimism over results from Chinese e-commerce giants JD.com and Alibaba. There is an overarching belief that Chinese stocks may have the potential to catch up to the rally in broader markets, only adding to the upbeat atmosphere.
The bullish options activity surrounding China-focused ETFs indicates prevailing optimism among investors ahead of the much-anticipated meeting between the U.S. and China. While these ETFs have underperformed as of late, resulting in bearish sentiments among investors, the surge in calls and the anticipation of positive outcomes in both political discussions and with the results of e-commerce giants are accelerating the drive towards upbeat positioning. While the results of these positioning may be tied to the rally in broader markets, the general bullishness points towards a hopeful outlook that the political and economic outcomes will favor Chinese stocks.
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