🥇 First rule of investing? Know when to save! Up to 55% off Investing Pro before BLACK FRIDAYCLAIM SALE

China bullish flows continue, US sentiment improves after jobs report: Citi

Published 10/08/2024, 03:56 AM
© Reuters.
NDX
-
US500
-
US2000
-
STOXX50
-
HK50
-
HK50
-
FTXIN9
-

Investing.com -- Positioning in the FTSE China A50 index shifted to a heavily bullish last week, Citigroup strategists said Monday.

The change is partly due to investors unwinding previously profitable short positions, although more recent activity has seen these unwinds happening on positions at a loss. However, the significant rise in open interest suggests investors are actively increasing their long exposure, adding new risk.

In contrast, positioning in Hang Seng futures had already been extended prior to last week, with flows becoming more mixed in recent days. Despite this, both the FTSE China A50 and Hang Seng indexes are experiencing strongly bullish positioning, with investors boosting their market exposure to China in recent weeks.

“This does create larger sensitivity to downside surprises from here, but investors have been chasing the market rally and long positions have a large buffer with 22.5% profits on longs on average for A50,” Citi strategists said in a note.

“Even a 20% drop in index levels would leave half the long positions still in profit,” they added.

Meanwhile, US markets saw a dip in bullish sentiment for most of last week, although flows became more constructive on Friday following a positive surprise in US job numbers, which renewed hopes of a soft landing.

In the S&P 500, positioning remains highly extended at +3.0 on a normalized scale of 5, contrasting sharply with the Nasdaq 100, which has hovered near neutral for several weeks.

The Russell 2000 saw the sharpest shift, moving from a very bullish stance two weeks ago to near-neutral positioning, driven by a combination of long position unwinds and the addition of outright short exposure.

Overall, Citi notes that US markets are experiencing relatively small average profits and losses, which reduces pressure on current positions. The Nasdaq 100 shows a balance between long and short positions.

“This suggests that positioning could amplify volatility near-term through unwinds of shorts on a rally or of longs in a sell-off; each scenario could amplify the initial market moves,” the strategists continued.

In Europe, positioning in the Euro Stoxx 50 index remains close to neutral. Over the past month, bearish sentiment has decreased, but momentum has stalled, and investors have not shifted to net long positions.

According to Citi, investors are likely being more selective in their European exposures, as reflected in sector-specific exchange-traded fund (ETF) flows.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.