Hong Kong derivatives trading hits record high for third year amid market volatility

For a third year in a row, trading of derivatives in Hong Kong has hit a record.

More than 377 million futures and options have changed hands on the city’s bourse since January, up 14 per cent from 2023, data from Hong Kong Exchanges and Clearing (HKEX) shows. That happened as stock-volatility gauges hit their highest levels in more than two years in October.

China’s pledge to revive its economy initially spurred a wave of euphoria among traders, but that quickly waned with the government’s slow pace of implementation. Equity gyrations jumped as trading of shares hit levels never seen before, increasing the need to hedge. Some investors used derivatives to bet on the market in a cautious way, according to Societe Generale’s Frank Benzimra.

“In that case, it’s very much on the options market that you can express some views,” the strategist said at a briefing last Thursday.

China’s stimulus bazooka – which included interest-rate cuts, cash for banks and support for equities – made the once-beaten shares from Hong Kong and the mainland some of the world’s best for the year, before the easing of optimism triggered a rush to sell. Overall, daily stock turnover rose by more than one-fifth for Hong Kong and China from 2023, data compiled by Bloomberg shows.

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HKEX Chief Executive Bonnie Chan on building a vibrant market in Hong Kong

HKEX Chief Executive Bonnie Chan on building a vibrant market in Hong Kong

That helped spur the local derivatives market. With a few days remaining to the end of the year, options volume in Hong Kong increased 15 per cent from 2023 to 209 million contracts through Friday, while that of futures climbed 13 per cent to 168 million, HKEX data shows.