Hong Kong Exchanges and Clearing Limited (HKEx) has admitted the first listings of leveraged and inverse products launched by Samsung Asset Management. As of June 17, 2016, the total assets under management (AUM) in the four new Samsung L&I (leverage & inverse) products was HKD111.6m ($14.3m).
The new products offer exposure to South Korean equities and the Japanese stock market, and include the Samsung Kospi 200 Daily (2X) Leveraged Product, Samsung Kospi 200 Daily (-1X) Inverse Product, Samsung Topix Daily (2X) Leveraged Product and Samsung Topix Daily (-1X) Inverse Product. They began trading on the Hong Kong stock exchange on Monday.
Leverage and inverse products are one of the most popular exchange-traded products in countries such as South Korea, Japan and Taiwan, but Hong Kong is behind some of the other Asian markets in the development of L&I products, according to Joe Yip, associate director of marketing, ETF & index, Samsung Asset Management. "L&I products is a new product for Hong Kong's investors and they didn't see any innovative financial products for the last 10 years," said Yip. "The launch of L&I products brings an investment tool that provide flexible investment strategy for both the institutional and retail investors."
According to Yip, as a pioneer and "one of the most experienced managers in the area of futures based and L&I Products, Samsung Asset Management proved to the SFC its capabilities and commitment for developing "innovative financial products" in Hong Kong.
According to a HKEx spokesperson, L&I products will provide investors the ability to implement daily directional market views in a low-cost, efficient structure.
"L&I products are suitable for sophisticated trading-oriented investors who understand the nature of these products and the associated risks," said the HKEx official. "L&I products are not intended to be held longer than one day, therefore, investors need to actively monitor their positions. L&I products are not recommended for long-term, buy-and-hold investors."
Hong Kong's Securities and Futures Commission (SFC) gave the green light to the introduction of leverage and inverse products in February this year although the use of underlyings remains restricted to "liquid and broadly based non-Hong Kong, non-mainland foreign equity indices".
Brian Roberts (pictured), head of ETFs and senior vice president, client and marketing services, market development division of HKEx, said in a statement that the exchange expects to see a wide range of benchmarks available "as the market develops".
The approved leveraged and inverse ETFs will not be named 'ETFs' as the SFC considers that the characteristic of these products is different from traditional ETFs. L&I Products will be put under a new, standalone product category in the websites of the SFC and Hong Kong Exchanges and Clearing Limited (HKEx).
Up until now, only physical and synthetic ETFs could be traded in Hong Kong limiting the scope to long-only positions, with structured products being a popular vehicle to get enhanced exposure or invest on bearish strategies. The highest leveraging factor accepted by the regulator for leveraged ETFs is two times for leverage and one time for inverse strategies.
Samsung Securities is an active provider of equity linked securities (ELS) and derivatives-linked securities (DLS) in South Korea with more than 14,000 live products including securities and funds, and a 12% market share across US$2.7bn in sales, year to date.
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