Following President Trump's visit to Beijing with American business leaders, Chinese stocks, ETFs, and related sectors experienced significant rallies, signaling strong market optimism.
Alibaba Leads Surge in Chinese Tech Stocks
Shares of e-commerce giant Alibaba surged by 8%, leading to a 2.5% rally in the iShares China Large-Cap ETF (FXI). This positive momentum occurred despite Alibaba reporting earnings that missed most analyst expectations.
Options trading data highlighted significant bullish sentiment surrounding Chinese assets:
- Alibaba Options: ThinkOrSwim data showed a heavy preference for buying call options over put options, with over 75,000 calls bought compared to fewer than 12,000 puts.
- Overall Options Activity: Of the $160 million traded in options premium by midday Wednesday, 88% was concentrated in call purchases, according to SpotGamma.
Focus on China-Centric ETFs
ETFs tracking China showed intense trading activity, particularly in options volume. The KraneShares China Internet ETF was among the top-10 traded securities by options volume for much of the day.
Key observations regarding ETF options trading included:
- Over 750,000 contracts were traded for the ETF.
- Nearly all the premium—$48 million out of $50 million—was in call options.
- Nine of the top 10 trades by dollar amount were call purchases.
Neil McDonald, CEO of Moomoo, noted that retail traders are attributing this activity to the "Trump effect," suggesting expectations that improved U.S.-China dialogue could catalyze lagging Chinese tech names.
Unexpected Winner: Ford Motor
In a notable divergence, Ford Motor shares jumped 13%. This surge followed an analysis from Morgan Stanley, which suggested that the automaker's energy-storage licensing agreement with China's Contemporary Amperex Technology (CATL) could serve as a positive catalyst for the company.
