Surge in Hong Kong warrants market gives banks hedging headache

Highest volumes since 2007 causes risk management challenge for dealers

Hong Kong

Policy-loosening measures in China triggered a rally in Hong Kong stocks in April and a doubling of volumes in the derivatives warrants market, leaving dealers scrambling to find hedges to cover their positions.

The decision by China policy-makers on March 27 to allow mutual funds to trade the Stock Connect's southbound route caused a surge in volumes and valuations of Hong Kong stocks. At the same time, the China A shares rally since last year had caused a premium to emerge in dual-listed share

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