Onceprofitable options arbitrage collapses in losses
Unusual surge in callbuying upended market
Stimulus plans, U.S. election seen stoking volatility
SHANGHAISINGAPORE, Oct 25 Reuters Shanghai Power Asset Management Co has apologised to investors and shut its arbitrage strategy after heavy losses, the latest China hedge fund bruised by wild gyrations in the market since authorities vowed to support the economy and hit growth targets.
Power Asset, which trades options to bet against outsized market volatility, lost more than 10 million over the past month, the strategy39;s biggest ever loss, as China39;s stimulus blitz set off a furious stock market rally.
Due to the major changes in market environment, our options strategy was maimed, Power Asset said in a statement, announcing a phaseout of the strategy, which manages roughly 400 million yuan 56 million.
Its flagship fund under the strategy lost onefifth of the value over the past month, according to its website, joining a slew of funds hurt by the markets39; sudden turn.
We feel deeply guilty, and sorry, for the loss suffered by our investors, Power Assets said.
Stock turnover and volatility broke records after Beijing announced its biggest stimulus since the pandemic on Sept. 24.
During the scramble for China stocks, options that offered investors the right to buy shares suddenly became extremely expensive, said Rajesh Manwani, head of markets and wealth management solutions for Asia at Julius Baer,…