CSOP Asset Management has unveiled a new ETP in Hong Kong providing leveraged exposure to US large-cap growth stocks.

CSOP offers both 2x leveraged and 2x inverse leveraged Nasdaq 100 ETPs in Hong Kong.

The CSOP NASDAQ-100 Index Daily 2x Leveraged Product (7266 HK) has listed on the Stock Exchange of Hong Kong.

It trades in Hong Kong dollars and comes with an expense ratio of 1.99%.

The ETP uses derivatives to provide twice the daily return of the Nasdaq-100, a widely followed index of large-cap US-listed stocks.

The index consists of 100 of the largest US and international non-financial companies listed on Nasdaq Exchange and is widely seen as a barometer of the health of the US large-cap TMT sector.

Information technology stocks account for nearly half (47.0%) of the index’s total exposure and include tech titans Microsoft (11.5%) and Apple (11.5%). The communication services sector makes up another 21.0% and includes Alphabet (8.0%), Facebook (4.6%) and Netflix (2.0%). The third-largest sector exposure is consumer discretionary (16.4%) primarily due to the influence of e-commerce and cloud computing giant Amazon (10.0%).

The Nasdaq 100 has outperformed other major US equity benchmarks so far this year. The index has benefitted from its tilt towards mega-cap tech companies whose cash-strong balance sheets have fortified these firms against the economic damage wrought by Covid-19. The Nasdaq 100 is up 8.2% year-to-date (22 May) compared to losses of -7.7% and -13.4% for the S&P 500 and Dow Jones Industrial Average respectively.

The ETP complements an existing product from CSOP, the CSOP NASDAQ-100 Index Daily (-2x) Inverse Product (7568 HK), that provides twice the inverse daily return of the Nasdaq 100 Index. It comes with an expense ratio of 1.79%.

Melody He, Head of Sales and Product Strategy of CSOP Asset Management said, “Having successfully launched 7568.HK to help investors hedge the downward risks of NASDAQ-100 index in 2019 September, CSOP brought the 7266.HK to enable investors to deploy their trading strategies in a more diverse way, especially under the current marketing situation with intensifying volatility.”

“The NASDAQ-100 has a proven history of growth, impact and performance for investors who are keen to capture the potential of the world’s most innovative companies,” added Robert Hughes, Vice President and Head of Index and Advisory Services for Nasdaq Global Indexes. “Our work with CSOP is vital to bringing this opportunity to the APAC region. CSOP has a wealth of experience and expertise in serving the regional market. We look forward to working with them closely to best serve the investors in this part of the world.”

The ETPs will compete with similar products from China Asset Management Company, namely the ChinaAMC Direxion NASDAQ-100 Daily 2x Leveraged Product (7261 HK) and the ChinaAMC Direxion NASDAQ-100 Daily (-2x) Inverse Product (7522 HK). These products come with expense ratios of 1.65% and 2.20% respectively.

Inverse and leveraged ETFs provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are considered less appropriate for retail investors who may not fully understand the risks involved. Specifically, these funds tend to decay in value if held for an extended period of time, potentially leading to significant losses especially in volatile but range-bound markets.