“Kioxia, too, at 1.25x”: Semiconductor leverage market grows in Hong Kong

【Financial News, Tokyo = Correspondent Seo Hye-jin】A leveraged financial product that tracks the daily share-price movement of Japanese semiconductor company Kioxia Holdings by up to 1.25 times was listed on the Hong Kong stock market on the 10th. As leveraged products expand to include individual Japanese stocks, following Samsung Electronics and SK hynix, concerns are mounting that they could increase volatility in the underlying assets.
According to the Nihon Keizai Shimbun, Hong Kong-headquartered mainland Chinese asset manager CSOP Asset Management listed the “CSOP Kioxia Daily Max 1.25x Leveraged” on the Hong Kong Stock Exchange that day. This is believed to be the world’s first listing of a leveraged product based on an individual Japanese stock.
The product is designed to use swaps, a type of derivative, to track the daily share-price movement of Kioxia stock listed on the Tokyo Stock Exchange by up to 1.25 times. Since it tracks daily returns, this does not mean that its cumulative return over a holding period of several days will be 1.25 times the return on Kioxia shares.
Mechanical trading takes place during the “rebalancing” process used to meet the target leverage. Such trading can amplify price movements in the underlying asset, and if listings and trading of related products increase, they could also affect price formation in the Japanese stock market.
Last year, CSOP also listed in Hong Kong leveraged exchange-traded funds (ETFs) based separately on SK hynix and Samsung Electronics. The two ETFs gained popularity on the back of growing demand for artificial intelligence (AI), but plunged after the middle of this year.
In South Korea, the same type of leveraged ETF was permitted in May this year, but criticism mounted that it had increased share-price volatility, prompting authorities to move to tighten regulations, The Nikkei reported.
Japan does not allow the listing of leveraged products targeting individual stocks. In August, the Japan Financial Services Agency revised industry Q&A guidance related to financial instruments businesses and expressed the view that selling in Japan leveraged ETFs based on individual Japanese stocks created overseas is “not appropriate in the public interest.”
In the United States, too, several asset managers have applied to list leveraged products based on Japanese stocks, including Kioxia and SoftBank Group, but their applications have yet to succeed.
Trading was limited on the first day of listing. That morning, the trading value of the Kioxia 1.25x product in the Hong Kong market was less than 1% of that of the SK hynix 2x product. Citing the high price-volatility risk of leveraged products based on individual stocks, CSOP advised that they “are not suitable for long-term holding.”

[email protected] Seo Hye-jin Reporter