CSOP Asset Management has launched a new ETP in Hong Kong providing leveraged exposure to China’s onshore brokerage industry.
China’s brokerage industry is highly correlated to the performance of the broader A-shares market.
The CSOP CSI Brokerage Index Daily (2x) Leveraged Product (7252 HK) has been listed on the Stock Exchange of Hong Kong.
The ETP delivers twice (+200%) the daily return of the CSI All Share Investment Banking & Brokerage Index.
The index consists of the 50 largest companies listed on either the Shanghai Stock Exchange or Shenzhen Stock Exchange that are classified within the investment banking or brokerage industries, according to the CSI Industry Classification Standard.
Constituents are weighted by float-adjusted market capitalization subject to a single stock cap of 15%. Rebalancing occurs on a semi-annual basis.
As of the end of September, the index contained 49 constituents with the most notable positions being CITIC Securities (13.0%), East Money Information (12.4%), Haitong Securities (6.4%), Huatai Securities (5.5%), and Guotai Junan Securities (4.7%).
The ETP comes with an expense ratio of 2.00%.
China’s brokerage industry is highly correlated to the performance of the broader A-shares market as, during bull markets, several related business segments experience major growth including brokerage, proprietary investment, securities lending, asset management, and IPOs.
According to CSOP, in previous market recoveries, the brokerage industry was always the first to rebound and typically experienced notable outperformance – in the 2014-2015 bull market, for example, the ETP’s underlying index recorded a gain of more than 250%, almost twice the return of the Shanghai Composite Index.
Ding Chen, CEO of CSOP Asset Management, said: “I believe that the CSOP CSI Brokerage Index Daily (2x) Leveraged Product will be a good addition to our leveraged and inverse product spectrum, providing tactical investment opportunities to investors who look for amplified short-term investment opportunities of China A-Shares market.”
Investors should note that leveraged ETPs are not suitable as buy-and-hold investments as they 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.