Investor sentiment bearish on HK-listed Chinese stocks

Prices for options hedging against declines in Hong Kong-listed Chinese equities are at their highest for four years, signaling that market participants have lost confidence in the prospects of many mainland Chinese companies, Bloomberg reported. Prices for put options on the Hang Seng China Enterprises Index, which tracks mainland Chinese firms listed in Hong Kong, rose to 1.41 times the price of bullish options on September 1, the widest spread since March 2007. The increase comes amid turmoil in the European and US equity markets, and mixed signals that China’s economy may be slowing. “Investors are focused more on the bad news, on the risk, rather than the valuations, which are very cheap at the moment,” said Edward Chan of Royal London Asset Management. The put options have become more expensive even as investment banks such as Credit Suisse (CS.NYSE, CSGN.SIX), Morgan Stanley (MS.NYSE) and Deutsche Bank (DB.NUSE, DBK.FWB) have issued bullish forecasts.