• Derivatives trading has surged in February with market rally

• DeepSeek’s AI breakthroughs have boosted hopes for China tech

The year of the snake has started strong for Hong Kong’s options market.

Since trading resumed after the Lunar New Year, almost 1.2 million puts and calls changed hands daily on average, the most since October, according to data from Hong Kong Exchanges and Clearing Ltd. Investors have increased bets on tech firms and makers of electric vehicles as their shares have surged.

DeepSeek’s artificial intelligence breakthroughs have boosted optimism over the future of China tech, and companies including BYD Co. and some digital health providers have already announced integration plans. Traders have rushed to invest in anything that could be a beneficiary, sending the Hang Seng Tech Index to its highest level since 2022 — surpassing the October high triggered by China’s stimulus blitz.

“We’ve seen such a sudden reversal of sentiment post DeepSeek,” said Vikas Pershad, a portfolio manager at M&G Investments Singapore Pte. “People are coming back to Chinese equities. It’s long overdue, and using options is an inexpensive way to get exposure quickly.”

After slipping at the end of last year, options trading in Hong Kong has rebounded. This month, the daily average volume is already 38% higher than in January.

Almost 1.9 million contracts traded on the HKEX on Thursday, the most this year, with options on futures tracking the Hang Seng Tech Index hitting a peak. Bets have also soared for Chinese EV makers and their subsidiaries, including BYD Electronic International Co., whose options volume climbed to a record.

Derivatives trading has been on the rise in Hong Kong in recent years, with volume reaching a fresh record in 2024. China’s stimulus bazooka turned the once-beaten shares from the city and mainland into some of the world’s best before sentiment changed. Just as volatility picked up, HKEX launched weekly contracts on the Hang Seng Tech Index and some single stocks, adding new ways to bet on the market.

China’s tech hopes — along with worries over US President Donald Trump’s policies — have boosted stock swings once again. The HSI Volatility Index is up almost 5 points in February, heading for its biggest monthly jump since September.

For Gam Investment Management’s Jian Shi Cortesi, DeepSeek was like a bell that “woke up” investors to Chinese tech.

“Previously, investors thought AI plays were US large tech, AI semi, and hardware and power,” said the fund manager from Zurich. “Now the view is slowly changing to: China is actually quite advanced in tech — EV, drones, robots, AI, solar, battery.”