Why Hong Kong’s SK Hynix fund stayed at full leverage amid market volatility
South Korean investor Carol Kim thought Hong Kong-based CSOP Asset Management’s new flexible leverage structure would cushion losses in its SK Hynix leveraged product, only to take a 77.2 per cent hit after the fund maintained its maximum exposure every day following the revised rules. “I expected the flexible leverage structure to soften the blow, but it actually felt like it was dropping even…
South Korean retail investor Carol Kim experienced a significant loss of 77.2% on her investment in CSOP Asset Management's SK Hynix leveraged product after the fund maintained maximum exposure despite revised rules. Initially, she believed the flexible leverage structure would reduce her losses, but the fund remained at full double-exposure limit for three weeks following the change.
The fund's value dropped 26.9% in its first week under the new structure, and total assets under management declined by nearly 71.5% to HK$37.65 billion from a peak of HK$132.07 billion. Kim expressed disappointment, stating she would be lucky to recover even half her initial investment. CSOP explained that the fund was operating smoothly with ample capacity, and the manager did not consider adjusting leverage levels as they could access required derivative instruments.
The Securities and Futures Commission (SFC) later ordered issuers to incorporate safety buffers for flexible leverage adjustments during market volatility. After the mandate, CSOP adopted a flexible ratio of 1.1 times to 2 times for the SK Hynix product, which began on August 3. Kim remains optimistic about the Hong Kong market, contrasting it with South Korea's market driven by extreme retail speculation.
Written by urgent.news from SCMP Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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