CSOP Asset Management, a Hong Kong-based firm, has modified its investment strategy for single-stock leveraged exchange-traded funds (ETFs) that track Samsung Electronics and SK Hynix. This change involves adding options structures to enhance flexibility, a move prompted by the increasing popularity of these products among both Korean and Hong Kong investors and heightened volatility in the underlying stocks.
According to financial industry sources on March 13, CSOP Asset Management adjusted its strategies for three specific ETFs: CSOP Samsung Electronics Daily 2X, CSOP Samsung Electronics Daily -2X, and CSOP SK Hynix Daily 2X. Effective December 12, these products can now use options premiums, up to 25% of their net asset value, to gain leveraged exposure to the underlying stocks. This is in addition to the existing total return swap arrangements, which remain the primary investment tool while options serve as a supplementary mechanism.
The strategic shift addresses the growing volatility in major Korean semiconductor stocks and the rapid expansion of these funds. Previously, the ETFs replicated double the daily price movements of individual stocks primarily through swap contracts with securities firms. The new options trading component will partially supplement this structure to achieve the same leverage effect. This is particularly important as fund sizes grow with capital inflows, as swap contracts alone can reach counterparty capacity limits, making options a valuable tool for securing additional exposure and improving operational flexibility, while also offering advantages in liquidity management and cost efficiency.
Strong investor interest is evident in the trading volumes and asset growth of these ETFs. As of March 10, the SK Hynix 2X leveraged product had a daily trading volume of HK$3.6 billion ($460 million USD equivalent) and assets under management of approximately HK$19.8 billion ($2.5 billion USD equivalent), ranking fourth among all Hong Kong ETFs. The Samsung Electronics 2X leveraged product traded HK$1.2 billion ($153 million USD equivalent) on the same day, with assets totaling HK$6.8 billion ($870 million USD equivalent). Korean investors' holdings in the Samsung Electronics and SK Hynix 2X ETFs stood at $58.34 million and $75.9 million respectively as of March 10, representing surges of 198% and 79% from the beginning of the year.
The Hong Kong Stock Exchange reported that the annual trading volume for leveraged and inverse products listed in Hong Kong reached HK$835.7 billion (approximately $107 billion USD equivalent) last year, an 18.2% increase from HK$706.8 billion ($90 billion USD equivalent) in 2024. This growth was attributed to the launch of Asia's first single-stock leveraged and inverse ETF products and sustained investor interest in short-term volatility strategies.
