Goldman Says Promote S&P 500 Calls to Fund Bullish Choices on China

(Bloomberg) — Goldman Sachs Group Inc. stated traders ought to promote S&P 500 Index calls and fund shopping for of the identical choices on the Dangle Seng China Enterprises Index to place for a possible catch-up in battered China-related belongings.

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“Sentiment on China-exposed belongings has remained subdued this yr and didn’t mirror the danger urge for food rebound through the summer season,” undershooting a measure of urge for food for world progress, strategists together with Christian Mueller-Glissmann wrote in a be aware dated Oct. 17.

Whereas the choices market is portending swings within the near-term for China-related belongings, the volatility of the HSCEI Index is affordable versus that for the S&P 500 Index, they wrote.

The US financial institution’s bullish views on China fairness name choices come after the nations’ inventory gauges constantly featured among the many world’s worst benchmarks this yr as reopening and stimulus hopes have been bought into.

China belongings are tackling Covid-induced lockdowns, a disaster in property market and a rekindling of US-China tensions on prime of a worsening world macro backdrop. The HSCEI Index has dropped 31% this yr in comparison with a 23% fall within the S&P 500 Index.

Goldman is total underweight in equities in its cross-asset allocation however stays chubby on China in Asia and impartial on the S&P 500 Index. The financial institution prefers China’s A-shares over offshore equities as they’re comparatively much less uncovered to world macro headwinds and the US-China tensions, the strategists wrote.

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