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CSOP AM restructures inverse product

The firm has turned one of its inverse ETFs to -2x from -1x, aiming to capture stronger returns.

The CSOP Hang Seng China Enterprises Index Daily (-1x) Inverse Product will change its magnifier to -2x from 25 June 2019, according to an announcement from the Hong Kong Stock exchange.

A spokesman for the firm said mainly retail investors  have been trading the -1X HSCEI and they prefer a higher leverage. “When institutions hedge their Hong Kong/China exposure, they prefer to use the broader -1x HSI index. Hence we don’t see much demand for existing -1x HSCEI product.”

Inverse products aim to deliver the opposite of the daily return of the underlying index that they track. Therefore, the planned -2x magnifier in CSOP’s product is designed to produce returns two times the inverse of the Hang Seng China Enterprises Index.

However, the products typically use leverage, are high risk and can be very short-term.

According to the fund’s factsheet, CSOP’s China Enterprises Index Daily Product “does not seek to achieve its stated investment objective over a period of time greater than one day”.

In May, the Securities and Futures Commission (SFC) authorised CSOP Asset Management in Hong Kong to launch the CSOP Hang Seng Index Daily (-2x) Inverse Product, according to a filing from HKEx. The product was listed on the Hong Kong bourse on 28 May.

In 2016, the SFC authorised leveraged and inverse (L&I) products  as a new type of collective investment scheme. There are only around 22 L&I products listed on the exchange with total assets of HK$6.97bn ($890m), accounting for just 4.1% of Hong Kong’s ETF market, according to data from HKEX.

The CSOP spokesman said Hong Kong investors have some familiarity with L&I products.

“L&I products are popular in the US and Europe and from what we understand, Hong Kong investors are already active traders of these products.”

CSOP launched its Hang Seng China Enterprises Index Daily (-1x) Inverse Product in 2017. At the end of April 2019, it reported HK$230m in assets.

In Hong Kong, the firm has 15 listed ETFs, five of them are L&I products, according to FE data.

Performance of the CSOP Hang Seng China Enterprises Index Daily (-1x) Inverse Product (which will become -2x) vs its benchmark index and the category

Source: FE. In Hong Kong dollars. Since the inception of the product in March 2017.


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