Investors seeking to diversify beyond crowded artificial intelligence positions in Japan, South Korea and other markets are increasingly using bullish derivatives tied to Chinese equities, Bloomberg reported on Sunday. Major international banks have seen stronger demand for call options, call spreads and swaps linked to China’s CSI indexes, particularly the CSI 300, CSI 500 and CSI 1000. The CSI 1000 has rebounded somewhat but remains roughly 16% below its May peak after suffering its worst monthly performance since 2016 in July. Implied volatility on CSI 300 options has fallen near its one-year average, lowering the cost of positioning for a potential advance. Bank of America recommends call spreads on the CSI 1000, while Barclays said clients generally favor gradual upside strategies. UBS records showed that bullish CSI positions generated Asia’s largest derivatives flow during the week of August 30, including long swaps on the CSI 300 and CSI 500. Technology is now the largest sector in the CSI 300 and continues to gain weight in the CSI 500 and CSI 1000, strengthening the appeal of China’s independent technology ecosystem as a complement to global AI exposure. U.S. participation includes a large purchase of calls on the KraneShares CSI China Internet ETF, or NYSE:KWEB. PIMCO has reduced exposure to the Magnificent Seven and is seeking beneficiaries of AI spending among Asian equipment suppliers, Chinese financial companies, healthcare stocks and raw-material producers. Its largest China sector overweight is financials, while the MSCI China Materials Index has risen about 7.1% over the past month.