SK Hynix shares sank more than 19% intraday on July 29, setting a record for the stock’s biggest one-day drop. In Hong Kong, the product known as “Southern Double Long Hynix” fell more than 28% at one point before trimming its loss to 13.99% at the close, ending the session at HK$32.70.
On July 27, CSOP announced that its 2x leveraged and inverse products tied to SK Hynix, Samsung Electronics, Nvidia and Tesla will formally switch to a flexible leverage structure on Aug. 3. Under extreme market conditions, leverage can be reduced to as low as 1.1x, while inverse products can be reduced to as low as -1.1x.
The 2x bullish product has fallen 83% in a little over a month
SK Hynix has been in a sharp pullback over the past several weeks. On June 25, the stock touched a high of 2.987 million won per share in the Korean market. It then kept sliding and closed at 1.401 million won on July 29, leaving the stock down by half from that peak.
The loss in the leveraged Hong Kong product has been even steeper. “Southern Double Long Hynix” dropped from a June 25 high of HK$193.65 to HK$32.70 at the July 29 close, a decline of 83%.
Public information shows the product’s full name is the CSOP SK Hynix Daily Leveraged (2x) Product, Hong Kong stock code 07709. It is issued and managed by CSOP Asset Management and was listed on the Hong Kong Stock Exchange on Oct. 16, 2025.
Its market price climbed from HK$17.5 at the start of the year to a peak of HK$193.65, rising more than tenfold. After the correction over the past month, the product has fallen back to its price level from late February this year.
According to media reports, CSOP Chief Executive Officer Ding Chen said at an event on July 16 that the world’s first 2x leveraged product linked to SK Hynix had reached HK$130 billion in assets by June this year, just eight months after listing, making it the world’s largest single-stock leveraged product.
As the market price fell, the fund’s assets also shrank. The latest data showed that by July 29, assets had dropped to HK$31.9 billion. That was a contraction of nearly HK$100 billion in roughly a month and more than 70% below the peak.
Earnings surged, but still missed expectations
SK Hynix reported its second-quarter 2026 results on July 29. Revenue for the quarter came in at 79.32 trillion won, or about RMB 368.838 billion, up 257% year over year but below the market expectation of 84 trillion won. Operating profit reached 60.54 trillion won, or about RMB 281.511 billion, up 557% from a year earlier and also below the expected 64 trillion won. Net profit was 93.92 trillion won, or about RMB 436.728 billion, up more than 12 times year over year.
According to Yonhap News Agency, SK Hynix addressed concerns about a possible slowdown in AI infrastructure spending during its post-earnings conference call. The company said, “As AI competition among cloud service providers continues and services expand, we expect AI infrastructure investment to remain stable and ongoing after next year.”
On negotiations over next year’s high-bandwidth memory, or HBM, pricing, the company said, “Due to contractual relationships, it is difficult to disclose specific prices and details.” It added, “We are currently discussing supply volume and pricing with major customers, and based on solid customer demand, the discussions are progressing smoothly.”
Media reports cited Mirae Asset Securities analyst Kim Seok-hwan as saying that SK Hynix’s revenue, operating profit and operating margin for the previous quarter all fell short of market expectations.
Reuters reported that the company played down concerns that capacity expansion could lead to oversupply, saying it would adjust the scale of investment dynamically based on market demand.
SK Hynix also said, “Major technology companies continue to increase investment in AI infrastructure, and demand for additional supply is rising. Revenue generated by AI services will continue to support related capital expenditure, so growth in demand for memory chips is expected to continue.”
The report, citing analysts, said long-term supply agreements can help companies project long-range demand more clearly, but they also limit room for short-term price increases. That was described as one of the reasons the company’s results missed expectations. Analysts also said SK Hynix has a higher share of business in high-bandwidth memory, and price gains in that segment have lagged those of traditional memory chips.
Hong Kong rule changes bring flexible leverage to these products
On July 24, Hong Kong’s Securities and Futures Commission issued a revised Circular on Exchange Traded Structured Funds, setting out requirements for listed structured funds including leveraged and inverse products.
For leveraged and inverse products, the circular added specific provisions. Products whose scale can swing sharply with market moves are required to adopt a flexible leverage mechanism, meaning the daily leverage ratio can be adjusted dynamically but may not exceed the relevant leverage cap. The standard leverage range ceiling runs from 2x to -2x. After the close of each trading day, issuers must disclose the target leverage ratio for the next trading day on their websites and on the HKEX website.
The circular also said leveraged and inverse products are short-term trading tools and differ completely from traditional long-term ETF products in positioning. Names of products recognized by the SFC may not use the ETF label. Instead, they must be named as “leveraged product” or “inverse product” depending on type. Their names must also include the leverage or inverse multiple and the word “daily” to highlight the daily rebalancing feature.
Following the new rules, CSOP said on July 27 that its 2x leveraged and inverse products linked to SK Hynix, Samsung Electronics, Nvidia and Tesla will move to the flexible leverage structure on Aug. 3. In extreme market conditions, leverage can be cut to as low as 1.1x, and inverse leverage can be cut to as low as -1.1x. The product names will also be changed.
According to the report, Guo Yiming, investment advisory director at Jufeng Investment Consulting, told China Business Network that under the previous fixed 2x framework, daily gains and losses were mechanically magnified twofold regardless of how violently the underlying moved or how tight market liquidity became. Once a heavily weighted stock saw sharp single-day swings, a fund’s swap exposure could quickly max out, leaving market makers to cut positions passively to control risk. That could easily cause a large disconnect between the product’s net asset value and the underlying stock, alongside a sharp drop in premium, with the risk borne by investors and issuers.
Guo said that after the shift to flexible leverage, the product will still retain a maximum 2x ceiling, but the fund can lower actual leverage each day according to the stock’s trading activity, remaining swap capacity and intraday volatility. In extreme conditions, leverage can fall to 1.1x. The new framework also adds mandatory daily disclosure of real-time leverage and renaming requirements that make leverage variability explicit.
In his view, compared with the old mechanism, issuers will see a substantial reduction in operational risk during extreme market moves, and the change should also reduce severe premium and discount distortions. For retail investors, the biggest change is that upside and downside elasticity will no longer be constant. During volatile sessions, gains and losses may come in far below what a fixed 2x structure would have produced. That means investors can no longer rely on a fixed-double trading assumption and need to check the disclosed actual leverage before each trading day.
Guo warned that these products are suitable only for short-term trading and are not fit for medium- to long-term holding.
The article cited in the original report came from the WeChat account “中新经纬” (ID: jwview) and was written by Wei Wei.