Hong Kong Exchanges and Clearing Limited (HKEX) today (Monday) welcomed its first listings of Leveraged and Inverse Products, or L&I Products (please see table below for details).
HKEX's First L&I Product Listings
L&I Products are structured as Exchange Traded Funds (ETFs) and commonly known as Leveraged and/or Inverse ETFs in some overseas markets, but they can differ from traditional ETFs in the following ways:
- Investment objective - seek to achieve a multiple (2x or -1x) of their benchmark's daily performance, before fees and expenses;
- Compounding effects of daily returns - performance can deviate from the multiple of the benchmark’s cumulative return when held for longer than one day; and
- Use of derivatives - invest a portion or all of their net assets in derivatives, typically futures or swaps.
Leveraged Products are designed to provide daily investment results, before fees and expenses, of up to 200 per cent of the performance of their benchmark. For example, if the underlying index rises by 10 per cent on a given day, a two-times Leveraged Product aims to deliver a 20 per cent return on that day.
Inverse Products are designed to provide daily investment results, before fees and expenses, of up to 100 per cent of the inverse performance of their benchmark. For example, if the underlying index rises by 10 per cent on a given day, an Inverse Product aims to deliver a -10 per cent return on that day.
"L&I Products are an important milestone in the development of Hong Kong's ETF market as they will give investors more tools for reaching their goals," said Brian Roberts, Head of ETFs and Senior Vice President, Client and Marketing Services, Market Development Division of HKEX. "We look forward to more listings and hope to see a wide range of benchmarks as the market develops."
As with other exchange-traded products, investors should understand the risks and rewards of L&I Products before using.
Further information on L&I Products is available on the HKEX website.
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