“Traders pushed options bets that pay off when emerging-market stocks retreat to a 17-month high, speculating China’s actions to restrain inflation will slow the global economic recovery. The ratio of bearish put contracts to bullish calls on the U.S.-listed iShares MSCI Emerging Markets exchange-traded fund (EEM) climbed to 1.97, the highest level since August 2008, data compiled by Bloomberg show. Trading in options to sell the iShares MSCI Brazil Index Fund (EWZ) jumped to a record 214,404 on Jan. 20, while puts on the iShares FTSE/Xinhua China 25 Index Fund (FXI) reached 164,121 on Jan. 21, the most in three months, data show,” Jeff Kearns Reports From Bloomberg.

“Emerging markets are a source of unease,” Dean Curnutt, president of New York-based Macro Risk Advisors LLC, which advises institutions on derivatives, wrote in a note to clients. Investors “are starting to make their bets in ETFs that are directly or indirectly related to China,” he wrote.

“Inflation in the world’s third-largest economy rose to 1.9 percent in December, exceeding economists’ forecasts, and gross domestic product climbed 10.7 percent in the fourth quarter, the government said last week. That’s adding to concern policy makers will take steps to restrain prices, spurring speculation that slowing growth in China will derail the recovery in developing countries. China expanded by an estimated 8.5 percent last year, helping to pull the world out from the worst recession since World War II. The MSCI Emerging Market Index rose 75 percent in 2009, the biggest advance since Bloomberg began tracking data,” Kearns Reports.

“There is little to suggest that the price appreciation we’ve seen in emerging equity markets exhibits the kind of characteristics seen in previous equity market bubbles,” David Lubin, a London-based economist at Citigroup, wrote in a report.

The most-traded contracts on the emerging-markets ETF over the past five sessions were February $40 puts, according to data compiled by Trade Alert LLC, a New York-based provider of option market analytics.

“It seems to be a mad rush for downside protection across regions and sectors,” said Jim Strugger, an options strategist at MKM Partners LP in Greenwich, Connecticut.

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Here are some details on the 3 ETFs mentioned below:

The investment (EEM) seeks investment results that correspond generally to the price and yield performance of the MSCI Emerging Markets index. The fund generally invests at least 90% of assets in the securities of its underlying index or in ADRs and GDRs representing such securities. The index was developed by MSCI as an equity benchmark for international stock performance. It is nondiversified.

TOP 10 HOLDINGS ( 23.64% OF TOTAL ASSETS)

Company Symbol % Assets Bank Bradesco ADR N/A 1.75 China Mobile Ltd. N/A 1.8 HDFC BANK LTD (HDB) 1.79 ITAU UNIBANCO ADS (ITUB) 2.7 KB FINL GP INC (KB) 1.75 Petroleo Brasileiro S.A. N/A 2.77 PETROLEO BRASILEIRO (PBR) 2.38 POSCO (PKX) 2.36 Samsung Electronics Co Ltd N/A 3.62 TAIWAN SEMICOND ADS (TSM) 2.72

The investment (EWZ) seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Brazilian market, as measured by the MSCI Brazil index. The fund normally invests at least 95% of assets in the securities of its underlying index and in ADRs based on the securities in its underlying index. It uses a representative sampling strategy to try to track the index. The index consists of stocks traded primarily on the Bolsa de Valores de So Paulo. It is nondiversified.

TOP 10 HOLDINGS ( 64.16% OF TOTAL ASSETS)

Company Symbol % Assets Ambev Cia De Bebid Pfd N/A 3.19 Banco Bradesco N/A 4.77 Cia Siderurgica Belgo-Mineira N/A 3.01 Gerdau SA N/A 3.69 Itau Unibanco Banco Multiplo N/A 7.81 OGX PETROLEO NM (OGXP3.SA) 2.37 Petroleo Brasileiro SA (Preference) N/A 12.54 PETROBRAS (PETR3.SA) 10.25 Vale N/A 9.46 VALE S.A. ADS (VALE) 7.07

The investment (FXI) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/Xinhua China 25 index. The fund generally invests at least 90% of assets in securities of the Underlying index and in depositary receipts representing securities of the Underlying index. The Underlying index consists of 25 of the largest and most liquid Chinese companies. It may invest the remainder of assets in securities not included in its Underlying index but which BGFA believes will help the fund track the Underlying index. The fund is nondiversified.

TOP 10 HOLDINGS ( 61.42% OF TOTAL ASSETS)

Company Symbol % Assets Bank of China Ltd N/A 5.83 China Citic Bank Corporation Limited N/A 4.01 China Construction Bank Corporation N/A 9.11 China Life Insurance Company, Ltd. N/A 8.72 China Merchants Bank Co.,limited N/A 4.47 China Mobile Ltd. N/A 9.27 China Shenhua Energy Company Limited N/A 4.33 CNOOC, Ltd. N/A 3.98 Industrial & Commercial Bank of China N/A 7.35 Ping An Insurance (group) Company Of China, Ltd. N/A 4.35

 

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ETF BASIC NEWS, NYSE:EEM, NYSE:EWZ, NYSE:FXI