OPTIONS traders in China are betting that one of the world’s worst-performing stock markets is due for a rebound.

    The cost of bullish contracts on the China 50 exchange-traded fund (ETF) is near the highest level this year relative to bets that profit from a decline, data compiled by Bloomberg shows. While the mainland ETF is up 17 percent from its 2016 low, that rebound has been dwarfed by a surge for mainland stocks traded in Hong Kong.

    With a 15 percent drop this year, the Shanghai Composite Index is the fifth-worst performer among 94 global measures tracked by Bloomberg.

    “People might be buying some call options as there are expectations for catch-up plays,” said Caroline Maurer, head of China equities at BNP Paribas Investment Partners in Hong Kong. Other “markets have gone up sharply. A shares may well be stimulated as this underperformance has been too long.”

    Options traders are speculating the benchmark Shanghai gauge will end a five-month stretch of meandering near the 3,000 level, after the Hang Seng China Enterprises Index’s 29 percent rebound from a February low narrowed the discount on Hong Kong shares to the smallest since 2014.

    Bocom International Holdings says investors are also trading options because — Monday’s slump aside — the cash market is so dull: China’s benchmark equity index has moved less than 1 percent at the daily close for 20 of the past 21 sessions.

    The H share index climbed to its highest level since November last week, when 90 percent of its members traded above their 200-day moving average, the highest proportion since August 2014.

    (SD-Agencies)