Vanishing hedges hurt HK warrants issuers
Traders suspect big losses after Hang Seng gapped down at start of wild week
Dealers are thought to have taken heavy losses on Hong Kong-listed equity products when the Hang Seng Index gapped down on Monday – the start of a week of historically wild trading.
Because the HSI opened 4% lower than the previous week’s close, it deprived warrants issuers of a key hedge, forcing them to buy new offsets at inflated prices. The gap down also meant issuers of callable bull contracts were unable to offload their hedges in time to avoid a loss.
“We saw some people going out to
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