Why Hong Kong’s SK Hynix fund stayed at full leverage amid market volatility

Hong Kong's CSOP Asset Management's SK Hynix leveraged product continued to operate at full leverage despite heightened market volatility, leading to a steep decline for investors. A South Korean retail investor, Carol Kim, noted her disappointment with the fund's performance, describing the impact as more severe than anticipated. The CSOP SK Hynix Daily Max (2x) Leveraged Product had initially attracted traders due to its alignment with the chipmaker's rising stock, which surged over 349.23 percent from the beginning of 2026 to its peak on June 22. Following the adjustment of the fund's structure on August 3, CSOP shifted from a fixed leverage model to a flexible one, offering a range of ratios from 1.1 times to two times. This change was intended to serve as a structural buffer, enabling fund managers to adjust exposure during periods of sharp sell-offs and potentially ease the effects of extreme market fluctuations. However, according to daily disclosures, the fund remained at its maximum leverage level, double exposure, for three consecutive weeks after the revision. During the first week under the new structure, the fund experienced a significant drop, declining by 26.9 percent. Its share price fell from HK$42.52 (US$5.42) to HK$31.06. Simultaneously, the weekly turnover saw a dramatic decrease, dropping by 44.6 percent to HK$40.15 billion (US$5.12 billion). These figures highlight the substantial impact of maintaining full leverage amidst volatile conditions, particularly when the underlying asset experiences rapid declines. Carol Kim, who has been investing in the product since early 2026, expressed frustration with the outcome. She had hoped the flexible leverage structure would provide some protection against potential losses. Instead, she found the experience akin to watching the product fall even harder than the shares in South Korea. Her comments reflect the broader concerns of investors who were drawn to the product's initial success but faced unexpected challenges as market conditions changed. The shift in leverage strategy underscores the complexities of managing leveraged products in dynamic markets. While the flexible approach aimed to offer greater adaptability, the consistent maintenance of maximum exposure suggests that the fund did not fully capitalize on the intended benefits of the new structure. Investors remain wary of the risks associated with high leverage, especially in uncertain environments where market movements can be unpredictable and swift. As the situation unfolds, further developments will likely focus on how the fund navigates future market shifts and whether adjustments to its leverage strategy will better align with investor expectations. For now, the performance of the CSOP SK Hynix leveraged product serves as a case study in the challenges of leveraging assets in fluctuating financial landscapes.