CSOP Gold Futures Daily (-1X) Inverse Product (Stock Code: 7374.HK) to List on HKEX

The first inverse gold futures-based product in Hong Kong

HONG KONG--(BUSINESS WIRE)--CSOP Gold Futures Daily (-1X) Inverse Product (stock code:7374.HK) will be listed on Hong Kong Stock Exchange on 20 October, 2021. As the first inverse commodity product issued in Hong Kong, 7374.HK provides investment results closely corresponding to inverse (-1x) the daily performance of Solactive Gold 1-Day Rolling Futures Index (the “Index”) by using a combination of a future-based replication strategy and a Swap-based synthetic replication strategy. 7374.HK attracted USD 12 million initial investment. The inception price per unit is around HKD 7.8 with trading lot of 100, and the entry investment is approximately HKD 780. Before 7374.HK, CSOP Gold Futures Daily (2x) Leveraged Product (stock code: 7299.HK) was launched on 5 June, 2020. Having accumulated USD 248.3 million in size and recorded HKD 30.37 million average daily trading volume as end of August 2021, 7299.HK is extensively invested by Hong Kong investors to express their positive view to gold price in the long run. ¹Meanwhile, the listing of 7374.HK will help investors to handle the volatility and downtrend of gold price in the short run.

Gold has long been seen as a store of value and an important alternative to currency. The price of gold usually fluctuates around and is negatively correlated with US dollar over the long term. On 15 March, 2020, the Fed announced to carry out unlimited QE policy to increase the liquidity of U.S. banks. Its balance sheet has almost doubled from USD 4.31 trillion on 11 March 2020 to USD 8.33 trillion on 24 August 2021². Since then, along with the global panics over Covid-19, gold futures price has peaked due to the concerns over inflation in July 2020³. Fed is likely to plan tapering the QE gradually and bringing monetary policy back to normal in view of an economic recovery. When the Fed’s balance sheet is shrinking, it will pull out the liquidity from the market which could strengthen USD, thus inducing more uncertainties to gold prices in the short term. In addition to QE, major economies also lowered interest rates to stimulate the economy. At the outbreak of the pandemic, the Fed has trimmed the interest rate down from a previous target range of 1% ~1.25% to almost zero.⁴ Now, in response to a higher risk of inflation, the Fed is expected to wind down its pandemic-era stimulus program and raise the interest rate in near future. With a market consensus on a stronger USD, the gold prices may see a bigger swing in the following time.

Ms. Ding Chen, CEO of CSOP comments, “We are happy to see the warm market responses towards the commodity leveraged & inverse products. The success of 7299.HK gives us the confidence in launching the 7374.HK.” Melody He, Managing Director and Head of Business Development, adds “From elevated tensions between the U.S. and China to the ongoing COVID-19 epidemics, the futures market has faced with more uncertainties than ever. We hope CSOP Gold Futures Daily (2x) Leveraged Product (7299.HK) and CSOP Gold Futures Daily (-1X) Inverse Product (7374.HK) will help investors weather the storm of increasing uncertainties.”

About CSOP Asset Management Limited

CSOP Asset Management Limited (“CSOP”) was founded in 2008 as the first offshore asset manager set up by a regulated asset management company in China. With a dedicated focus on China investing, CSOP manages public and private funds, as well as providing investment advisory services to Asian and global investors. In addition, CSOP is best known as an ETF leader in Asia. As of 31 August 2021, CSOP has more than USD 10.2 billion in assets under management.

IMPORTANT: Investments involve risks. Investment value may rise or fall. Past performance information presented is not indicative of future performance. Investors should refer to the Prospectus and the Product Key Facts Statement (“KFS”) for further details, including product features and risk factors. Investors should not base on this material alone to make investment decisions

Product Risk Disclosure:

CSOP Gold Futures Daily (-1X) Inverse Product

CSOP Gold Futures Daily (-1x) Inverse Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures and swap based product with an objective to provide investment results that, before fees and expenses, closely correspond to the inverse (-1x) of the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.

• The investment objective of the Product is to provide investment results that, before fees and expenses, closely correspond to the inverse (-1x) of the Daily performance of the Index. The Product does not seek to achieve its stated investment objective over a period of time greater than one day.
• The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver an inverse return of gold spot price.
• The Product is a futures and swap-based inverse product investing directly in COMEX Gold Futures. Although there have been commodities exchange traded funds, futures- and swap-based exchange traded funds and leveraged and inverse products in Hong Kong, the Product will be one of the first inverse products tracking a single commodity futures index (such as the Index) in Hong Kong. The novelty and untested nature of such an inverse product makes the Product riskier than traditional exchange traded funds investing in equity securities or non-leveraged / inverse futures or swaps funds.
• The Product is a derivative product and is not suitable for all investors. There is no guarantee of the repayment of principal. Therefore your investment in the Product may suffer substantial or total losses.
• The Manager may, at its discretion make distributions out of capital. The Manager may also, at its discretion, make distributions out of gross income while all or part of the fees and expenses of a Product are charged to/paid out of the capital of the Product, resulting in an increase in distributable income for the payment of distributions by the Product and therefore, the Product may effectively pay distributions out of the capital.
• The Product tracks the inverse performance of the Index on a Daily basis. Where the performance of the Index is positive, it could have a negative effect on the performance of the Product. Unitholders could, in certain circumstances including a bull market, face minimal or no returns, or may even suffer a complete loss, on such investments.
• The Product is not intended for holding longer than one day as the performance of the Product over a period longer than one day will very likely differ in amount and possibly direction from the inverse performance of the Index over that same period (e.g. the loss may be more than -1 times the increase in the Index).
• The effect of compounding becomes more pronounced on the Product’s performance as the Index experiences volatility. With higher Index volatility, the deviation of the Product’s performance from the inverse performance of the Index will increase, and the performance of the Product will generally be adversely affected.
• As a result of Daily rebalancing, the Index’s volatility and the effects of compounding of each day’s return over time, it is even possible that the Product will lose money over time while the Index’s performance falls or is flat.
• Investing in the Product is different from taking a short position. Because of rebalancing, the return profile of the Product is not the same as that of a short position. In a volatile market with frequent directional swings, the performance of the Product may deviate from a short position.
• As the Index is based upon active COMEX Gold Futures but not on physical gold, the performance of the Index may substantially differ from the current market or spot price performance of gold. Accordingly, the Product may underperform the -1x inverse Daily performance of the spot price of gold bullion.
• The trading price of the Units on the SEHK is driven by market factors such as the demand and supply of the Units. Units may trade at a substantial premium or discount to the NAV.
• There is no assurance that the Product can rebalance its portfolio on a Daily basis to achieve its investment objective. Market disruption, regulatory restrictions or extreme market volatility may adversely affect the Product’s ability to rebalance its portfolio.
• Investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks.
• The investments of the Product are concentrated in single active COMEX Gold Futures generally. This may result in large concentration risk. The value of the Product may be more volatile than that of a fund having a more diverse portfolio of investments and a product which holds futures contracts with different expiring months. The value of the Product may be more susceptible to adverse conditions in the gold market. The Product may experience greater volatility and may be adversely affected by the performance of industries and sectors or events related to gold and to its production and sale.
• The Product is not “actively managed” and under normal market circumstances, the Manager will not adopt any temporary defensive position when the Index moves in an unfavourable direction. In such circumstances, Units of the Product will also decrease in value. Under extreme market circumstances, the Manager will adopt temporary defensive position for protection of the Product.
• The Product may be subject to tracking error risk, which is the risk that its performance may not track that of the Daily inverse performance of the Index exactly. This tracking error may result from the investment strategy used, high portfolio turnover, liquidity of the market and fees and expenses and the correlation between the performance of the Product and the -1x inverse Daily performance of the Index may be reduced. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication of the inverse performance of the Index at any time, including an intra-day basis.

Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus and the Product Key Facts Statement in detail before making any investment decision.

CSOP Gold Futures Daily (2x) Leveraged Product

CSOP Gold Futures Daily (2x) Leveraged Product (the “Product”) is a sub-fund of CSOP Leveraged and Inverse Series II, an umbrella unit trust established under Hong Kong law. Units of the Product (the “Units”) are traded in HKD on The Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks. It is a futures-based product which invests directly in the Active Contracts of gold futures traded on the New York Commodity Exchange (COMEX) (“COMEX Gold Futures”) to give the Product twice (2x) the Daily performance of the Solactive Gold 1-Day Rolling Futures Index (the “Index”). It is denominated in USD. Creations and redemptions are in USD only.

• The investment objective of the Product is to provide investment results that, before fees and expenses, closely correspond to twice (2x) the Daily performance of the Index. The Product does not seek to achieve its stated investment objective over a period of time greater than one day.
• The Index consists of only gold futures whose price movements may deviate significantly from the gold spot price. The Product does not seek to deliver a leveraged return of gold spot price.
• Investment in the product is only suitable for sophisticated trade-oriented investors who understand the potential consequences of seeking Daily leveraged results and the associated risks constantly monitor the performance of their holding on a daily basis.
• The trading price of the Units on the SEHK is driven by market factors such as the demand and supply of the Units. Units may trade at a substantial premium or discount to the NAV.
• The Manager may, at its discretion make distributions out of capital. The Manager may also, at its discretion, make distributions out of gross income while all or part of the fees and expenses of a Product are charged to/paid out of the capital of the Product, resulting in an increase in distributable income for the payment of distributions by the Product and therefore, the Product may effectively pay distributions out of the capital.
• The Product will utilise leverage to achieve a Daily return equivalent to twice (2x) the return of the Index. Both gains and losses will be magnified. The risk of loss resulting from an investment in the Product in certain circumstances including a bear market will be substantially more than a fund that does not employ leverage.
• The Product is a leveraged product investing directly in COMEX Gold Futures. The Product is the first product tracking the leveraged performance of a single commodity futures index in Hong Kong. The novelty of such a leveraged product makes the Product riskier than traditional exchange traded funds or products tracking the leveraged or inverse performance of equity indices.
• The Product is not intended for holding longer than one day as the performance of the Product over a period longer than one day will very likely differ in amount and possibly direction from the leveraged performance of the Index over that same period (e.g. the loss may be more than twice the fall in the Index).
• There is no assurance that the Product can rebalance its portfolio on a Daily basis to achieve its investment objective. Market disruption, regulatory restrictions or extreme market volatility may adversely affect the Product’s ability to rebalance its portfolio.
• Investment in futures contracts involves specific risks such as high volatility, leverage, rollover and margin risks.
• The investments of the Product are concentrated in single active COMEX Gold Futures generally. This may result in large concentration risk. The value of the Product may be more volatile than that of a fund having a more diverse portfolio of investments and a product which holds futures contracts with different expiring months. The value of the Product may be more susceptible to adverse conditions in the gold market.
• There is no guarantee that the gold price, and the prices of COMEX Gold Futures will appreciate. The Product may experience greater volatility and may be adversely affected by the performance of industries and sectors or events related to gold and to its production and sale.
• The Product is not “actively managed” and under normal market circumstances, the Manager will not adopt any temporary defensive position when the Index moves in an unfavourable direction. In such circumstances, Units of the Product will also decrease in value. Under extreme market circumstances, the Manager will adopt temporary defensive position for protection of the Product.
• The Product may be subject to tracking error risk, which is the risk that its performance may not track that of the Daily leveraged performance of the Index exactly. This tracking error may result from the investment strategy used, high portfolio turnover, liquidity of the market and fees and expenses and the correlation between the performance of the Product and the two times (2x) Daily performance of the Index may be reduced. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication of the leveraged performance of the Index at any time, including an intra-day basis.

Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus and the Product Key Facts Statement in detail before making any investment decision.

Index Provider Disclaimer

The Product is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Solactive Gold 1-Day Rolling Futures Index and/or the use of Solactive trade mark or the index price/prices of the Solactive Gold 1-Day Rolling Futures Index at any time or in any other respect. The Solactive Gold 1-Day Rolling Futures Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Solactive Gold 1-Day Rolling Futures Index is calculated correctly. Irrespective of its obligations towards CSOP Asset Management Limited, Solactive AG has no obligation to point out errors in the Solactive Gold 1-Day Rolling Futures Index to third parties including but not limited to investors and/or financial intermediaries of the Product. Neither publication of the Solactive Gold 1-Day Rolling Futures Index by Solactive AG nor the licensing of the Solactive Gold 1-Day Rolling Futures Index or Solactive trade mark for the purpose of use in connection with the Product constitutes a recommendation by Solactive AG to invest capital in the Product nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in the Product. Remember, the information in the Prospectus does not constitute tax, legal or investment advice and is not intended as a recommendation for buying or selling securities. The information and opinions contained in the Prospectus have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and it should not be relied upon as such. Solactive AG will not be responsible for the consequences of reliance upon any opinion or statement contained therein or for any omission.

This material has not been reviewed by the Securities and Futures Commission.

Issuer: CSOP Asset Management Limited

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¹ Source: Bloomberg, CSOP Asset Management Limited, as of 31 August 2021
² Source: Statista, as of 24 August 2021
³ Source: Bloomberg, as of 1 July 2020
⁴ Source: The Federal Reserve, as of 16 March 2020