Morgan Stanley : The Most Efficient China Super-Bear Case Hedges

Morgan Stanley에서 나온 Report. 

중국 경제의 경착륙에 대한 Hedge를 제시하고 있는데, 중국경제에 영향을 가장 많이 받는 대만의 주가지수와 통화에 short을 때리는 것이 매력적인 답이다라는 내용. 하지만 그 hedge군에 한국도 있다는 사실. 

외국인투자자들의 시각으로 볼때, 개방정도가 작은 중국 때문에 개방도가 큰 한국시장이 된서리를 맞을 수 있다는 사실이 흥미로우나 두렵다.

The prospect of financial sector deleveraging in China increases the risk of a hard landing - despite yesterday's goldilocks GDP print (and ugly miss in IP). Although the probability of the hard landing is still low, Morgan Stanley warns it’s not low enough to make hedging costs irrelevant: The new government's policy drive to deleverage the banking sector has become more apparent, and they think this deleveraging will likely continue to unfold in the next 6-12 months. In MS' Super-Bear scenario, they expect aggressive policy tightening to reduce 2H13 GDP growth to 5.5% YoY. In this scenario, policy-makers are also slow to respond to this deceleration, leading to more turmoil in the financial sector. Although a low probability event, this would have major implications for global markets. MS estimates that markets are pricing in a 1-in-10 chance of a Super-Bear scenario in China in the coming 12 months, more in equities, less in FX markets.

Via Morgan Stanley,

The new government's policy drive to deleverage the banking sector has become more apparent. In the three months preceding the spike in money market rates the CBRC/SAFE have announced measures to regulate interbank entrust payments, wealth- management products, leverage in bond investments, FX lending and interbank loan structures all with the aim of curtailing the widespread use of new financial channels to grow bank assets rapidly. We think this deleveraging will likely continue to unfold in the next 6-12 months.

The Cheapest China Hedges

• FX and credit hedges tend to be more cost-effective than equity hedges, although most hedges are still marginally more expensive than at the start of the year, due to the post-May sell-off as well as higher vol levels. Most markets are now down YTD, although with considerable dispersion.
• CNY (FX) puts have the highest reward/risk ratio, although we have some reservations about the actual effectiveness of the puts due to potential FX intervention and restrictions on capital flows. China sovereign CDS also looks attractive, although the possibility of an actual credit event looks extremely remote.
• The most attractive equity hedge are puts on the TWSE.

What's Priced In?

and How Bad could it get?

Source: Morgan Stanley and ZeroHedge.com