Emerging & European Equity Performance since Brexit

By: Richard Rosenthal – CBOE Director, Business Development

Investor interest has been growing in the European and Emerging equity markets as evidenced by significant rallies in some of the major indexes, particularly the FTSE 100 and FTSE China 50.

Comparing the performances of the offshore equity markets to the U.S., the outperformance has been impressive since the results of the Brexit announcement on June 24th.   The S&P 500 has rallied +6.6% compared to FTSE 100 +10.5% and FTSE China 50 +16.7% looking at last night’s closing prices.

The chart below illustrates the hypothetical growth in value of $100 investment in the U.K., Chinese, and U.S. equity markets using the index levels on the FTSE 100, FTSE China 50, and S&P 500 from June 24th to Sept. 8th.

Brexit

This week’s options volume on the iShares China Large Cap ETF (ticker: FXI) was dramatically higher driven by call activity. This month alone the Put/Call ratio in FXI is .39 to 1 which is sharply lower than SPX 1.92 to 1.

A closer examination of yesterday’s FXI option activity revealed some investors believe the Chinese equity market be a little overbought as a couple of large vertical call spreads traded. The first was selling 19,000 FXI 39 Calls and Buying 19,000 39.5 Calls with a Sept. 16th expiration and the other was selling around 40,000 FXI 40 Calls and Buying 40.5 Calls with an Oct. 21st expiration.

Earlier this year CBOE introduced options on the FTSE 100 and FTSE China 50 Mini-indexes. These FTSE indexes offer investors new opportunities to gain exposure to the largest and most liquid segments of the U.K and Chinese equity markets and an alternative offering several benefits when compared to the options on ETF’s.

For further information on the cash-settled options on FTSE Russell Indexes listed at CBOE please visit: www.cboe.com/FTSE Russell.