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CSOP to launch new 2x inverse product

It is the second NASDAQ 100-linked (-2x) inverse product launched by a China asset manager this month.

“The CSOP NASDAQ-100 Index Daily (-2x) Inverse Product will invest in Nasdaq e-mini futures to replicate the performance of the Nasdaq 100 index,” a spokesman told FSA.

The announcement follows the launch earlier this month of China Asset Management’s ChinaAMC Direxion Nasdaq-100 Daily (-2x) Inverse Product.

Both the CSOP and ChinaAMC issues come in the wake of the SFC’s relaxation of its 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 for inverse products was raised to two-times (-2x).

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

“After a decade-long bull market, the US stock market stands at a record high, but the worries about a downtrend are escalating,” said the spokesman.

“Compared with the S&P 500 index, the Nasdaq 100 is more volatile. As the 2 times inverse product is designed to capture short term trading opportunities, given the greater volatility, the Nasdaq 100 is considered more suitable as an underlying index,” he added.

The product, whose minimum issue size is HK$80m ($10.2m), has been approved by the Securities and Futures Commission (SFC) for sale to retail investors in Hong Kong, the regulator’s record shows.

Growing sector

When the new CSOP product is launched on Thursday, there will be four inverse products listed in Hong Kong with a -2x magnifier. Two of the existing three issues are also managed by CSOP: 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.

CSOP Hang Seng Index Daily (-2x) Inverse Product has become the largest L&I product in Hong Kong, with HK$2.86bn in assets, according to data from the Hong Kong Exchange(HKEX).

There are now 23 L&I products in Hong Kong. As of the end of July 2019, the total assets was around HK$7.38bn, accounting for 2.3% of Hong Kong’s ETF market, according to data from HKEX.

L&I products are relatively new in Hong Kong, having been first authorised by the SFC in 2016.

Part of the Mark Allen Group.