A-share leveraged and inverse products draw strong investor interest
Offerings open new chapter for short-term directional trading in China-listed stocks
12 Aug 2020 | The Asset

Hong Kong Exchanges and Clearing, the city’s stock exchange operator, has seen growing investor interest in its four newly listed A-share leveraged and inverse products (L&I products), with turnover hitting a single-day record high of HK$194.3 million on August 11.

The city has long been recognized as the premier gateway to China for offshore investors. Its top three most traded A-share exchange traded funds (ETFs) accounted for 26% of the average daily turnover of the ETF market in the first half of 2020.

“The introduction of A-share L&I products has opened a new chapter for short-term directional trading in A-shares,” HKEx said in a statement. “We believe that the four new products and upcoming listings will enhance our A-share offerings even further.”

While A-share ETFs and L&I products can complement each other to meet investors’ trading and hedging needs, they are constructed differently to achieve different investment objectives.

A-share ETFs replicate the investment performance of the underlying index, i.e., CSI 300, making them good vehicles for long-term investment or tactical asset allocation.  A-share leveraged products magnify the daily returns of the underlying index, while A-share inverse products provide the opposite of the daily returns of the underlying index. A-share L&I products are more suitable for short-term investment.

Investors need to understand their key differences to build an optimal A-share portfolio, HKEx says.

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