The first Leveraged and Inverse Products (L&I Products) that track the Hang Seng Index or Hang Seng China Enterprises Index were listed on the Hong Kong Exchanges and Clearing Limited (HKEX) on March 14. CSOP Asset Management Limited among others was approved to offer such products. The introduction of L&I Products provide investors with diverse investment tools via leverage and inverse.
“Leverage risk is closely related to market regulations. Currently, lots of small investors in the market need further learning. L&I Products tracking indexes will help regulators to control risks in the market,” said HKEX Chief Executive Charles Li.
An executive from CSOP said that CSOP listed 4 L&I Products on the HKEX this time, with a total scale of 180 million US dollars, ranking first in the product category. CSOP HSI & HSCEI L&I products （Tickers: 7200/7300 & 7288/7388） recorded HKD 215 million aggregate turnover today accounting for 62% of the overall market. HSI Leveraged products is the most traded category among 4 product categories with aggregate HKD 115million turnover today followed by HSCEI leveraged products with HKD 87million, HSCEI invers products HKD 86.4million , and HSI inverse products HKD 60 million in descent order
Compared with warrants tracking the Hang Seng Index or Hang Seng China Enterprises Index, L&I Products are easier to understand as they have more simple structure. Retail investors tend to buy (2x) leveraged products which can magnify returns on the index if they are bullish about the market. Therefore, the turnover of leveraged products is slightly higher than that of inverse products. In contrast, institutional investors usually buy inverse products for hedging. This makes the scale of inverse products larger than leveraged products.
The HKEX has been cautious in offering L&I Products tracking the H-share index. Before the introduction of such products, it launched L&I Products tracking overseas indexes last year. In fact, L&I Products are quite popular and perform well in other Asian markets (including South Korea, Taiwan and Singapore). As for whether they will introduce L&I Products tracking the A-share index, the CSOP executive said that it will depend on the regulators, but believed that such products will be very attractive to overseas investors after the Shenzhen-Hong Kong Stock Connect program launched.
By Yin Lan
Translated by Coral Zhong