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CSOP AM to launch HK’s first gold L&I product

The product has already received an initial investment of $5m.
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CSOP Asset Management has received approval from the Securities and Futures Commission to roll out the Gold Futures Daily (2x) Leveraged Product, according to the regulator’s records.

The product will track twice the performance of the Solactive Gold 1-Day Rolling Futures Index by investing in active contracts of gold futures traded on the New York Mercantile Exchange, according to a Hong Kong-based CSOP AM spokesman. The firm expects the product to be listed locally tomorrow.

The product has already received an initial investment of $5m, the spokesman said, noting that investors usually use gold as a hedge against macroeconomic uncertainty.

“Since the beginning of 2020, gold performed among the best assets during the global panic over the Covid-19,” he said.

Year-to-date ending 3 June, the Solactive Gold 1-Day Rolling Futures Index performed 10.3%, according to the index factsheet. It has outperformed global equity and bond markets, with the MSCI All Country World Index performing -5.46% and the Bloomberg Barclays Global Aggregate, returning 2.12% during the same period, according to data from FE Fundinfo.

Relaxation of Hong Kong’s L&I market

When launched, the CSOP Gold Futures Daily (2x) Leveraged Product will be the first commodities-focused L&I product in Hong Kong.

CSOP’s move follows after the SFC allowed commodities-tracking L&I products to be launched in the SAR. In March last year, the regulator released a circular saying that that it will accept applications for L&I products tracking commodities indices “on a case by case basis”.

The regulator has been actively relaxing rules on Hong Kong’s L&I market. Also in March last year, the SFC loosened regulations on inverse products. Previously, inverse products were subject to a maximum leverage factor of one time (-1x), and under the new rules, the leverage factor cap of inverse products was raised to two-times (-2x). So far, four inverse products with a leverage factor of -2x have been made available in the market – two managed by CSOP and another two from China Asset Management.

In addition, the regulator last month announced that it was allowing mainland-tracking L&I products to be launched in the SAR. Previously, only Hong Kong and non-mainland foreign equity indices were allowed on the local bourse.

At the time of the announcement, the CSOP spokesman said that the firm is mulling plans to launch mainland-focused L&I products in Hong Kong, as it expects that there will be sizable demand.

CSOP, which also recently launched a leveraged Nasdaq ETF in Hong Kong, now manages seven L&I products (excluding the gold futures product), according to the regulator’s records.

The total L&I market — 24 listed products — had assets of HK$8.33bn ($1.07bn) at the end of April, according to data from the local bourse.

L&I products were only allowed in Hong Kong in 2016. The sector remains small, accounting for 2% of the SAR’s overall HK$295bn ETF market.

Part of the Mark Allen Group.