Spring has arrived and our home town Chicago baseball teams (Cubs & White Sox) lead their respective Central Divisions.  Likewise the Chinese and Emerging equity markets have also taken an early lead in the global economic recovery this year.

On April 18, 2017 IMF delivered their World Economic Outlook, a report which raised the global economic outlook in 2017 to 3.5% and 3.6% in 2018 citing “Stronger activity and expectations of more robust global demand…”  Their outlook for the U.S. economy was left at 2.3% for 2017.

Recently firms have upgraded China equities to an overweight…

“Goldman Joins the China-Equity Bull Party After Missing Rally” Bloomberg Article (3/12/17)

https://www.bloomberg.com/news/articles/2017-03-13/goldman-joins-the-china-equity-bull-party-after-missing-rally

To paraphrase:

  • EPS gains at +13% for 2017 and +11% for 2018
  • $54 billion of investment flows from mainland China into Hong Kong
  • Chinese banks and property stock are seen extending gains.

“JP Morgan’s Chang Is Contrarian Overweight China Equities” Bloomberg (4/25/2017)

https://www.bloomberg.com/news/videos/2017-04-25/how-china-and-the-u-s-could-deal-with-north-korea-video

  • China’s 1st Quarter’s data showing improving profits and forecasting economic growth to 6.7%
  • Export Growth and increased manufacturing
  • Overweight IT, Banks, Insurance, Brokers, and Industrials

$1,000 Investment (Hypothetical) Y.T.D. Performances:

With the S&P 500 bullish run in its 8th year may be slowing down +6.64% (y-t-d).  Outside of the U.S., the global recovery is growing stronger as reflected by FTSE China 50 +10.92% and FTSE Emerging +12.20% in 2017.

RR1
30-day Implied Volatilities

The VIX Index measuring the 30-day expectation of implied volatility currently indicates an expectation for a continued rally in the S&P 500 as it hovers near its year’s low at 10.74.  In comparison, the volatility levels on the iShares Large-cap China ETF (VXFXI) and the MSCI Emerging ETF (VXEEM) have both declined by over -30% since the beginning of the year and also reaching their respective lows for the year as seen in the chart below.
RR2

FTSE China 50 and FTSE Emerging Cash-settled Index Options:

Using options strategies can be a great way to capture upward price movement with limited downside risk.

The cash-settled index options on FTSE China 50 and FTSE Emerging are listed and trade exclusively on CBOE:

FTSE China 50 Mini-Index contract notional value is dollar denominated (1/100th) of the underlying index currently around (173.87 * $100 = $17,387).

Option Symbols: CBOE – FXTM, Bloomberg – FXTM, Thomson Reuters - FXTM

For additional information on cash-settled options on FTSE China 50 Index visit: www.cboe.com/FXTM

The FTSE Emerging contract notional value is dollar denominated and currently around (493.13 * $100 = $49, 313).

Option Symbols: CBOE – FTEM, Bloomberg – FTAG01, Thomson Reuters - FTEM

For additional information on cash-settled options on FTSE Emerging Index visit: www.cboe.com/FTEM