China AMC to debut 2x inverse product

Latest News

Separately, one of CSOP Asset Management’s recently launched (-2x) inverse products has become the second largest L&I ETF in Hong Kong.

The Securities and Futures Commission (SFC) has authorised China Asset Management in Hong Kong to launch the ChinaAMC Direxion Nasdaq-100 Daily (-2x) Inverse Product, according to records from the regulator.

When launched, this will be the third inverse product that will be listed in Hong Kong with a -2x magnifier. The other two are managed by CSOP Asset Management: the Hang Seng China Enterprises Index Daily (-2x) Inverse Product, which was restructured in July from just having a -1x multiplier, and the Hang Seng Index Daily (-2x), which was launched in May.

Inverse products aim to deliver the opposite of the daily return of the underlying index that they track. Therefore, China AMC’s new -2x magnifier product is designed to produce returns two times the inverse of the Nasdaq 100 Index.

China AMC expects the product to be listed tomorrow, according to a Hong Kong-based spokeswoman for the firm.

China AMC and CSOP’s product launches come after the SFC relaxed rules on inverse products in March. Previously, inverse products were subject to a maximum leverage factor of one time (-1x). Under the new rules, the leverage factor cap inverse products was raised to two-times (-2x).

Investor demand?

It is early days to see whether the new product category will be popular among Hong Kong investors. However, CSOP’s Hang Seng Index Daily (-2x) Inverse Product has become the second largest L&I product in Hong Kong, with $1.99bn ($250m) in assets, according to data from the Hong Kong Exchange.

On the other hand, CSOP’s recently restructured product, the Hang Seng China Enterprises Index Daily (-2x) Inverse Product, now has assets of around HK$169.8m, which is lower than the recorded HK$230m at the end of April when it still had a (-1x) multiplier.

China AMC believes that there will be investor demand for its new product, according to the spokeswoman, noting that the firm already manages an inverse product tracking the Nasdaq 100 Index, but with a (-1x) multiplier, which has already gathered some assets.

“We are seeing signficant interests from investors in our Nasdaq 100 Index daily (-1x) Inverse product,” the spokeswoman said. That product now has around HK$311.3m in assets, making it the third largest L&I product in Hong Kong, HKEX data shows.

“In response to our investors’ request, we decided to come up with the (-2x) inverse version,” she said.

In total, there are 22 L&I products in Hong Kong, assets of around HK$7.38bn, accounting for just 2.3% of Hong Kong’s ETF market, according to data from HKEX.

L&I products are relatively new in Hong Kong, as they were just authorised by the SFC in 2016.

Tags: | | |

Leave a Reply