PANews, July 27: According to Tencent News, a 26-year-old trader at Hong Kong-based Zhi Fu Management Services Limited misappropriated HK$50 million of company funds without authorization, using them as margin to purchase the Southern Asset Management 2x Long Hynix ETF via leveraged financing. Due to the dual leverage (margin financing + 2x leveraged ETF), the position incurred a paper loss of approximately HK$150 million. The ETF reached a historical high of HK$193.65 at the end of June but, following a correction in the semiconductor sector, had declined over 72% to HK$52.58 by July 20. The trader has been arrested by police on suspicion of theft; as the position remains open, the final loss is still subject to price fluctuations.
HK trader unauthorizedly uses HKD 50 million to go long on Hynix, suffers HKD 150 million loss
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Summary
A 26-year-old trader at Hong Kong’s Wealth Management Services Co. Ltd. unauthorizedly used HKD 50 million to leveraged buy the Hynix 2x Long ETF, resulting in a HKD 150 million loss. The combination of double leverage—margin financing and the 2x ETF—exposed the position to extreme risk, disregarding its unfavorable risk-to-reward profile. The ETF peaked at HKD 193.65 in June but declined 72% by July 20. The trader has been arrested, and the loss remains subject to market fluctuations as the position is still open. Clearly, long-term investing principles were ignored in this high-risk trade.
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