Author: Gelong
A fund changing its name sounds rather ordinary.
But "2x Long SK Hynix" becoming "Up to 2x Long SK Hynix"—the addition of those two words "up to"—likely means the hope for tens of thousands of holders to recover their losses has just been extinguished.
07709 is a 2x leveraged ETF by CSOP Asset Management, tracking the South Korean semiconductor giant SK Hynix.
When it was listed in October 2025, the issue price was only HKD 7.8. Riding the global AI wave, with SK Hynix being a core supplier of HBM chips, its stock price soared. This product also went wild, reaching HKD 193.65 by June 2026—a gain of over 10 times—with its AUM exceeding HKD 130 billion, becoming a highly sought-after product in the market.
However, leverage is always a double-edged sword.
In late June, as the underlying SK Hynix stock retreated from its highs, the 2x long 07709 plummeted off a cliff. It fell nearly 87% from HKD 193.65 to around HKD 25, wiping out hundreds of billions in market value. As of this writing, the latest price for 07709 is HKD 28.6.
Just as holders anxiously waited, hoping a rebound in the underlying stock could help them recover their losses, the fund manager CSOP Asset Management stepped in.
An announcement on July 27 stated that starting August 3, the product would switch to a "Flexible Leverage Structure"—the leverage multiple is no longer fixed at 2x but can be dynamically adjusted between 1.1x and 2x.
Put plainly: it will try to give you 2x when the market is good, but quietly drop to 1.1x when the market is bad.
Objectively speaking, reducing the leverage multiple during a market crash can lessen the ETF's decline, which protects investors. However, the issue is that if the market bottoms out and rebounds, lowering leverage will slow the recovery for investors in the red, consuming more time and capital costs. This is especially relevant now when Korean stock indices, along with the stock prices of SK Hynix and Samsung Electronics, have already retreated significantly, and Morgan Stanley has published a report suggesting that the leverage unwinding in Korean stocks is nearing its end, with valuations becoming attractive again.
Of course, this change has a specific context: the Hong Kong Securities and Futures Commission (SFC) issued new regulations on leveraged products on July 24, allowing products to adjust their target leverage multiples under extreme market conditions. Procedurally, the fund manager may not have violated any rules.
But is compliance necessarily reasonable?
During the rally, "2x" was the招牌 to attract capital; during the decline, "2x" became "up to 2x," ready to shrink at any time.
For the same product and the same group of holders, the treatment is like night and day between the rise and fall.
While such an operation may not be illegal, it factually rewrites the rules of the game, touching upon the core, and most sensitive, aspect of the fund industry, the financial markets, and indeed the entire commercial society—contractual spirit.
In Hong Kong, changes by the fund manager to investment objectives, performance benchmarks, or diversification limits that harm investors' original expectations are considered major amendments to the fund's constitutive documents. They cannot be made unilaterally by the manager.
The formal procedure for amending such rules is as follows:
1) The fund manager and the trustee submit a prior application to the SFC for regulatory pre-approval advice;
2) Send a circular to all holders and convene a holders' meeting;
3) A special resolution is required: it takes effect only if approved by more than 75% of the units voted at the meeting;
4) A notice period of at least 30 days must be given, providing holders with a buffer time to redeem and exit;
5) After final SFC approval, the constitutional amendments officially take effect.
Did this company follow these procedures, and did it obtain approval from a fund holders' meeting for such a major modification? If there are procedural issues, should the fund holders who suffered losses band together to seek compensation?
Even more intriguing is that the fund charges an annual management fee of 1.60%, accumulating approximately HKD 356 million since its listing.
When the net asset value soared, management fees swelled accordingly; when it plummeted, management fees were still collected without fail.
Now, with the rules changed, the fund company has successfully avoided liquidation risk, continuing to make steady money. Meanwhile, holders who entered at high points may have lost even the last glimmer of hope—waiting for the underlying stock to rebound and using leverage to turn things around.
Frankly, this renaming essentially sacrifices the holders' potential to recover losses to preserve the fund company's own survival.
This structural misalignment, where the manager is guaranteed profits while holders bear the losses alone, is the most terrifying part.
Theoretically, if the fund company anticipates a bottom and rebound in the stock price, it could also adjust the leverage back to 2x. However, this requires extremely high market-timing skills; one would need to make accurate predictions. If the fund company truly possessed such capabilities, why did it fail to successfully foresee the sharp retreat over the past month?
The chill here is not about the candlestick charts; it's a harsh story about rules, contracts, interests, and trust.
