U.S. stocks, particularly the Nasdaq, have experienced their best quarter since 2020, contrasting sharply with the situation in China, where the iShares China Large-Cap (FXI) has fallen 18% this year and is in a bear market that has lasted nine months.
The KraneShares CSI China Internet ETF (KWEB) has seen a more than 40% drop from its peak in October, driven by concerns over AI valuations and trade tensions. Nike's shares also fell in after-hours trading despite beating earnings expectations, as the company expressed concerns about the Chinese consumer's resilience.
However, there are signs of optimism as Chinese stocks saw a brief rally following reports of improved manufacturing activity and the highest services PMI since May. This led to a notable increase in options trading for KWEB, with volume nearly three times the 30-day average. Of the 628,000 contracts traded, 612,000 were calls, indicating a strong bullish sentiment among traders.
The most popular contract was a 29-strike call expiring on December 18, which requires a 23% increase in the ETF's price to break even. A significant trade involved the purchase of nearly 102,000 of these calls, amounting to $11 million, suggesting that some investors are positioning themselves for a potential rebound in the Chinese internet sector