In recent recaps we have spoken of consistent upside call buying in Asia related equity ETFs including iShares FTSE China 25 (NYSEArca: FXI), iShares MSCI Hong Kong (NYSEArca: EWH), iShares MSCI Japan (NYSEArca: EWJ), iShares MSCI Malaysia (NYSEArca: EWM) and iShares MSCI Taiwan (NYSEArca: EWT). [ETF Options Trading]
Due to the similarity of the trading, involving mostly December options and the timing of these trades hitting the tape, it is likely that one institutional player is using call options to leverage a bullish bet on the long side of Asia heading into year’s end.
Notably, Asian country ETFs have underperformed the U.S. equity market significantly year to date, with performance figures that look like the following: S&P 500 Index down 4.38% year to date, FXI down 22.08%, EWH down 17.38%, EWJ losing 12.18%, EWM falling 7.16%, and EWT down 19.46%.
If a broad based equity rally into year’s end were to take place like a good number of market prognosticators have been calling for in recent weeks, we would imagine Asian based equity ETFs would narrow the performance gap between themselves and U.S. equities considerably due to the higher beta nature of these markets and rally accordingly.
From a technical standpoint, all of the aforementioned funds are bumping up against their 50 day moving averages after spending a considerable amount of time below these lines, so we may see some technical resistance in the near term.