(Bloomberg) – Starting Monday, investors will have a new opportunity to wager on some of Hong Kong’s most prominent tech stocks. The city’s stock exchange is launching weekly options on the Hang Seng Tech Index, which includes major firms like Alibaba Group Holding Ltd. and JD.com Inc. This comes as many e-commerce giants have seen a dip in value during the recent earnings season, with the index down 5.4% this year, lagging behind the Hang Seng Index which has gained 5.5%.
Hong Kong Exchanges & Clearing Ltd. (HKEX) is expanding its derivatives portfolio to enhance trading activity amid a sluggish market. While the Hong Kong market has been hurt by a weaker Chinese economy and growing mainland influence, derivatives trading has flourished, reaching a record 14.3 million contracts.
“This should help lift overall market liquidity,” said Eugene Hsiao from Macquarie Capital. The new weekly options will offer better price discovery and more tactical risk management for investors. HKEX first introduced weekly options in 2019, primarily for the Hang Seng Index and the Hang Seng China Enterprises Index. While these options have seen growing interest, they still account for a small fraction of overall trades.
Drawing parallels with the US market, where weekly options on the S&P 500 Index and individual equities have substantially boosted trading volumes, experts like BNP Paribas’s Jason Lui highlight that shorter durations and cheaper premiums make weekly options particularly appealing to investors seeking leverage.
HKEX is actively working to boost the liquidity and attractiveness of its $5 trillion market. Recent initiatives include cross-listing ETFs with Saudi Arabia and introducing crypto instruments. Starting November 4, HKEX will extend weekly options to individual stocks such as HSBC Holdings Plc, Alibaba, and Tencent Holdings Ltd.
A representative from the exchange said, “HKEX is fully committed to enhancing its markets by expanding its product suite and strengthening its infrastructure to meet the needs of global investors.” The Hang Seng Tech options have already seen a 65% increase in volume earlier this year.
BNP Paribas’s Lui believes that while it may take time for the market to fully adapt to these new products, the eventual payoff will be significant, offering investors better diversification options.
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Original Story https://www.livemint.com/news/a-new-way-of-betting-on-tech-stocks-is-emerging-in-hong-kong-11725230450666.html
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