Leveraged Inverse Products have received a strong market reception since they launched in Hong Kong in 2017, with the market capitalisation growing to HK$6.64 billion as of 31 August, accounting for about 2.2 per cent of the total market capitalisation of exchange traded products in Hong Kong. This positive momentum continued in August, as we saw the average daily turnover (ADT) of L&I products breaking though the HK$1 billion mark for the first time!
Check out the video below to see how the products work.
What is a Leveraged Inverse Product?
Leveraged Inverse Products, structured as Exchange Traded Funds (ETFs), seek to achieve an investment result that corresponds to the magnified and opposite performance of the underlying benchmarks on a daily basis. In Hong Kong, the performance multiple is capped at two times (2x) for leveraged products and negative two times (-2x) for inverse products.
For example, if the underlying index has declined by 1 per cent on a single day, a -2x Inverse Product should deliver a 2 per cent positive return on that day, before fees and commissions.
What are the key characteristics of Leveraged Inverse Products?
Leveraged Inverse Products offer the same benefits as ETFs. They can be traded like stocks throughout the trading day, giving investors the potential to profit from market declines or to hedge portfolios against market volatility over a short time horizon.
How do Leveraged Inverse Products compare to short-selling?
Short-selling requires a margin account and investors have to pay loan fees to borrow stocks.
On the other hand, Inverse Products can be traded with a brokerage account where no stock borrowing is required.
What are the risks?
Inverse Products will incur losses if the underlying index rises. Their performance will likely deviate from the stated return if they are held for more than one trading day, and deviations tend to be greater for Inverse Products with a higher multiple.
Tap Read More for details of Leveraged Inverse Products.