Futures bruised by Wall Street jitters
HANG Seng cash and futures indexes had a nasty day as falls on Wall Street overnight on Monday sent ripples through equity sentiment in Hong Kong.
The October future fell 158 points to 9,725, a discount to the cash of five points, on 12,307 contracts.
November fell by the same number of points to 9,735, a premium over the cash of five points, on 284 contracts.
The high in the October contract was 9,800 against a low in the day of 9,718.
Caution remains a big feature of sentiment. Investors are looking very hard at their exposure and more defensive positions are being taken where deemed prudent.
'A number of investors are going to be taking in profits and locking gains in after achieving a fairly respectable performance on the year so far,' one broker said.
Some brokers are looking for a strong re-bound in the cash market today.
Trading today will almost definitely take its lead from developments on Wall Street. Sentiment in Wall Street remains fragile on concerns about technology stock corporate earnings.
The big concern for more mainstream investors on Wall Street is economic data in the form of producer prices on Thursday and consumer prices on Friday for September.
These two bits of data will affect the whereabouts of the 30-year long bond yield, which took a day off yesterday on the Columbus Day break. Data showing modest economic activity will encourage further surges in bond prices as fears of inflation will further diminish. Data showing the economy picking up quickly with rising inflation pressures probably will stop the bond rally in its tracks.
Open interest in the futures on Monday was 37,388 contracts in October, 951 contracts in November and 155 contracts in December.
Implied volatility, at-the-money, in index money in October, remained at 19 per cent, according to WI Carr. In November it was higher at 20.25 per cent and in December it was at 22.25 per cent. Out to March 1996 it stood at 24.25 per cent and beyond September 1996 it was about 25 per cent.
Overall volume was 1,453 lots. There were big trades in October 9,800 puts and calls and buying of 9,800 November calls.