Global Quantitative & Derivatives Strategy15 January 2024J P M O R G A Nwww.jpmorganmarkets.comGlobal Quantitative and Derivatives StrategyTony SK Lee AC(852) 2800-8857tony.sk.lee@jpmorgan.comBloomberg JPMA TONYLEE J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedHaoshun Liu AC(852) 2800-7736haoshun.liu@jpmorgan.comBloomberg JPMA HLIU J.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedXipu Han AC(852) 2800-1029xipu.han@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedTwinkle Mehta, CFA AC(852) 2800-7109twinkle.mehta@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedDavide Silvestrini(44-20) 7134-4082davide.silvestrini@jpmorgan.comJ.P. Morgan Securities plcBram Kaplan, CFA(1-212) 272-1215bram.kaplan@jpmorgan.comJ.P. Morgan Securities LLCMarko Kolanovic, PhD(1-212) 622-3677marko.kolanovic@jpmorgan.comJ.P. Morgan Securities LLC•Dispersion trading opportunities in HK: There has been substantial compression in single stock versus index implied volatility in the HK equity derivatives market. This shift can be largely attributed to declining volatility of individual stocks and an elevated correlation among them. At present, the entry point for engagement in dispersion trading is near a two-year low, prompting us to screen for stocks where the potential for dispersion may be underestimated. Several catalysts, including the forthcoming earnings season, increased call buying activities from foreign investors, and the possibility of earnings alerts, could trigger increased dispersion in the near term. We investigate dispersion patterns during earnings and beyond, highlight key sectors to watch, and explore names that have historically pre-announced earnings in Jan and Feb. We recommend buying straddle on selected single stocks against that on the index to take advantage of attractively priced stock vs index implied volatility levels.•Structured product issuance trend in Korea: In Korea, the trend of structured products redemptions exceeding issuance was persistent throughout 2023, indicating low reinvestment interest among investors. Retail investors preference for other asset classes such as bonds and cash equities and a lack of diversification in worst-of index basket are among factors behind the weak issuance. Looking forward, we anticipate structured product issuance to remain at the lower end of historical range. Moreover, we notice that there is notable volume of HSCEI-linked autocallables set to expire in 1H24. However, the impact of futures selling due to re-hedging activities at product expiry would likely be moderate, given the expiry dates are dispersed across 1H24. •Structured product issuance trend in Japan: The issuance of NKY-linked structured products remained restrained in December 2023. •Dealers� gamma positioning ...
