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Malaysia's Affin Hwang launches country’s first leveraged and inverse ETFs

By Goh Thean Eu   
December 2, 2019

Malaysia’s Affin Hwang Asset Management has launched the country's first leveraged and inverse exchange-traded funds (L&I ETFs), investment vehicles that it says will allow investors to profit from market volatility.

The funds – the TradePlus NYSE Fang+ Daily 2x Leveraged Tracker, TradePlus NYSE Fang+ Daily -1x Inverse Tracker, TradePlus HSCEI Daily 2x Leveraged Tracker, and TradePlus HSCEI Daily -1x Inverse Tracker – began trading on Bursa Malaysia, the Malaysian stock exchange, on November 29.

They were introduced a year after Affin Hwang Asset Management signed a strategic partnership with the Hong Kong unit of South Korea’s Samsung Asset Management to develop investment products for the Malaysian market.

L&I ETFs allow investors to augment gains made by the underlying indices, although losses are also similarly amplified.

Speaking at the launch, Teng Chee Wai, managing director of Affin Hwang Asset Management, says the ETFs “would provide investors a tactical window to capitalise on benchmark movements by trading on market news/noise and profit from volatility".

"There is wealth to be made in both directions of the market,” he says.

According to Mr. Teng, the underlying benchmarks for the funds – the Hang Seng China Enterprises Index and NYSE Fang+ Index – were “carefully handpicked” for their “secular and highly volatile trend which is essential for short-term trading tools like L&I ETFs”.

The Hang Seng China Enterprises Index tracks Chinese companies listed in Hong Kong, including China Construction Bank, Ping An Insurance and Tencent Holdings.

The NYSE Fang+ Index tracks highly-traded growth and technology stocks such as Facebook, Amazon and Apple.

Mr. Teng says the new funds are part of the company's strategy to bolster its passive offerings. It now has a suite of six ETFs.

Muhamad Umar Swift, chief executive officer of Bursa Malaysia, says the bourse “is excited to welcome the country’s first L&I ETF” and commended Affin Hwang Asset Management’s “innovative push towards sophisticated ETF products to spur competitive growth of the industry and increase market vibrancy”.

In Taiwan, L&I ETFs have given a big boost to the island’s ETF market since they were introduced in 2014. Taiwan’s ETF assets have since grown 11-fold to NT$1.5 trillion (US$49.18 billion) as of October 2019, according to the Securities Investment Trust and Consulting Association.

The Malaysian L&I ETFs are open to retail investors who meet at least one of the criteria set by the stock exchange. They include owing a margin account, executing at least five transactions in exchange-traded derivatives or structured warrants within the preceding 12 months, and taking Bursa Malaysia’s e-learning tutorial on L&I ETFs.

There are no such conditions for investors in the 11 other ETFs listed on the stock exchange. The first one was launched in 2005.

Kuala Lumpur-based Affin Hwang Asset Management, one of the three largest private fund management firms in Malaysia, had 55.18 billion ringgit ($13.22 billion) of assets under management as of end-October 2019.