Malaysia’s Affin Hwang Asset Management has launched the country's first leveraged and inverse (L&I) ETFs, a year after the country’s financial regulator released regulation to facilitate the development of innovative ETF market.

The funds, the TradePlus NYSE Fang+ Daily 2x Leveraged Tracker (FANG2XL), TradePlus NYSE Fang+ Daily -1x Inverse Tracker (FANG1XI), TradePlus HSCEI Daily 2x Leveraged Tracker (0830EA), and TradePlus HSCEI Daily -1x Inverse Tracker (HSCEI1XI) – began trading on Bursa Malaysia, the Malaysian stock exchange, on November 29.

Malaysia greenlights leveraged and inverse ETPs

The ETFs are benchmarked against the Hang Seng China Enterprises Index and NYSE Fang+ Index. The former tracks Chinese large-caps listed in Hong Kong including Tencent Holdings and Ping An Insurance, while the NYSE index tracks highly-traded growth and technology shares such as Facebook.

Affin Hwang entrusted the Hong Kong’s unit of South Korea’s Samsung Asset Management to develop the ETFs in late 2018.

Affin Hwang is one of the five ETF managers in Malaysia. The firm launched its first passive product, Shariah-compliant commodity ETF, in 2017.

Teng Chee Wai, managing director of Affin Hwang Asset Management, says the L&I ETFs would allow investors to capitalise on benchmark movements by trading on market news/noise and profit from volatility.

Including the new funds, Affin Hwang currently manages six ETF products.  Mr Teng notes that the L&I products are part of the company’s strategies to bolster its passive offerings.

Last November, the Securities Commission Malaysia issued a set of guidelines that allows a diverse range of ETFs in the market, including L&I, synthetic, commodity, and smart beta ETFs.

With its high volatility exposure, Securities Commission limits L&I products to sophisticated and experienced retail investors.

The regulatory watchdog requires individual investors to meet at least one of the following criteria: owning a margin account, taking the stock exchange’s e-learning tutorial on L&I ETFs, or executing at least five transactions in structured warrants or exchange-traded derivatives within the preceding 12 months.

Bursa Malaysia believes the ETF guidelines, together with other initiatives such as exempting stamp duty on ETF transaction, will help double the number of ETFs in the short run from 11 in July 2019.

Muhamad Umar Swift, chief executive officer of Bursa Malaysia, says Affin Hwang’s “innovative push towards sophisticated ETF products to spur competitive growth of the industry and increase market vibrancy”.

Affin Hwang had 55.18 billion ringgit ($13.22 billion) of assets under management as of end-October 2019.