Swiss investment bank UBS has become the latest issuer of daily leverage certificates (DLC) in Singapore, listing a batch of ten of the financial instruments with Chinese stocks and Hong Kong’s Hang Seng Index as the underlying assets.
The long and short DLCs offer a fixed leverage of up to seven times the daily performance of technology giant Tencent Holdings, e-commerce giant Alibaba Group Holding, shopping platform Meituan, manufacturer BYD Co. Ltd, and the Hang Seng Index, Singapore Exchange (SGX) says in a statement on February 15, when the products were listed.
DLCs allow investors to enjoy greater returns from the performance of the underlying stock or index, but the losses are also amplified if there’s a decline.
For example, if a stock rises 2% on a particular day, investors who trade a seven-times long DLC on the stock stand to gain 14%. But they lose 14% if the underlying stock drops 2%.
SGX introduced DLCs in 2018.
According to Michael Syn, the bourse’s head of equities, investors have “come to recognise the benefits of using DLCs to capitalise on short-term price movements and market trends”.
He says SGX is “delighted” to have UBS on board as an issuer.
“As interest in listed structured products grows in Asia, we will continue to work with issuers to offer investors a wider suite of investment options. With DLCs linked to regional indices gaining popularity, we are also seeing interest from issuers to launch DLCs with US indices as the underlying [asset],” he says in the statement.
