China ‘Snowball’ Derivatives Worth $13 Billion Near Loss Levels
- Stock rout pushes the derivatives to near knock-in levels
- Spillover to spot equity markets can still be limited: CICC
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China’s relentless stock market rout is putting pressure on $13 billion worth of snowball derivatives, threatening to raise market volatility as brokerages are pushed to liquidate hedge positions.
About 30 billion yuan ($4.2 billion) of those structured products tied to the CSI 1000 Index are near levels that trigger losses at maturity, according to Guotai Junan Futures Co. Another 60 billion yuan of the derivatives are 5%-10% away from their knock-in thresholds, the brokerage said.