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How South Korea’s tech rout hit Hong Kong – and why regulators stepped in
Following an 80 per cent plunge in a popular SK Hynix leveraged fund, authorities have moved to overhaul rules for some high-risk investments
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South Korea’s roller-coaster market, driven by sharp swings in semiconductor giants Samsung Electronics and SK Hynix this year, has also reverberated in Hong Kong, where suspected fund embezzlement by a loss-making investment manager and outcry from leveraged-product investors have made headlines.
As an international financial centre, Hong Kong serves as a crucial gateway to access the Seoul stock market, with Futu Holdings – the Nasdaq-listed Chinese broker – just launching South Korea share trading and CSOP Asset Management’s leveraged product drawing strong interest.
But as SK Hynix faces a brutal sell-off, investors are being warned about the risks of buying high-volatility semiconductor stocks on margin. The warning comes as CSOP’s Hong Kong-listed exchange-traded product (ETF) linked to the tech giant – known as CSOP SK Hynix Daily (2x) Leveraged Product – plunged more than 30 per cent on Tuesday. The downward trend continued on Wednesday, with the price dropping by up to 25 per cent at one point.
The product surged to an all-time high of HK$193.65 (US$24.69) in late June, with its market capitalisation briefly surpassing HK$130 billion (US$16.57 billion) – making it Hong Kong’s largest ETP – before collapsing 80 per cent since the start of July.
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