HSCEI autocallable hedging hitting forex market, say dealers

Dealers flock to Hong Kong dollar options and forwards markets amid depeg fears

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China volatility has put pressure on the Hong Kong dollar peg to the US dollar

Attempts by issuers to rehedge structured products linked to a falling Chinese equity index have had a knock-on effect on Hong Kong dollar foreign exchange options and forwards, according to dealers.

Equity-linked autocallable products referencing the Hang Seng China Enterprise Index (HSCEI) and sold to Korean retail investors have been under pressure since the start of January, following a plunge that saw the index fall from more than 9,000 points to a low of 7,823.

With the investors paying in

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