China stock futures sending bearish signal

[SHANGHAI] TRADERS in Chinese stock-index futures are sending a bearish signal after benchmark gauges surged to the highest levels in seven months. The number of transactions for contracts on China's CSI 300 Index fell on Monday to the lowest level in 10 months versus share volumes in the cash market, data compiled by Bloomberg show. The last two times the ratio fell this low, in September and February 2013, the CSI 300 sank an average 8.2 per cent over two months.

China's most sophisticated traders favour futures because the contracts make it easier to add leverage to high-conviction wagers, Hong Hao, the Hong Kong-based strategist at Bocom International Holdings Co, said in an interview.

While the highest equity volumes since 2010 show increased confidence among individual investors in China's economic expansion, the lack of interest from futures traders is a sign the recovery is already reflected in stock prices, Mr Hong said.