China Just Made It Easier To Bet Against Its Priciest Stocks
Betting against China?s most expensive stocks just got a whole lot easier.
Futures on the small-cap CSI 500 Index started trading on Thursday, giving investors a cheaper way to wager on declines in shares valued at more than twice the level of the benchmark Shanghai Composite Index. The CSI 500 has surged 47 percent this year, versus a 26 percent gain for the Shanghai measure.
The contracts, which come five years after China introduced futures on the large-cap CSI 300 Index, are part of the nation?s efforts to allow more sophisticated trading strategies as policy makers open up the $7.1 trillion market to the rest of the world. Bocom International Holdings Co., China International Capital Corp. and Deutsche Bank AG say the new futures will probably weigh on smaller stocks as investors bet valuation premiums over larger companies will narrow.
?Interest should be high,? Hao Hong, the chief China strategist at Bocom International in Hong Kong, said in e-mailed comments on Wednesday. ?It?s a way to lock in gains from high-valuation stocks, as many of these stocks do not have liquidity when there is a selling stampede.?
China?s smaller shares plunged Wednesday after March economic data trailed estimates. The CSI 500 dropped 3.9 percent, while the the ChiNext index of smaller companies in Shenzhen tumbled 4.6 percent. The Shanghai Composite Index lost 1.2 percent, paring its rally over the past year to 94 percent.