On Monday evening last week, an investment company in the World Trade Center Tower in Central, Hong Kong, reported to the police that an employee was suspected of using the company's account for investments without authorization, resulting in a loss of approximately HK$150 million. Police subsequently arrived at the scene to investigate and are treating the case as a theft, arresting a 26-year-old man.

According to reports, the arrested man worked at the securities trading company in question for about six months as an investment manager. Mainland media, citing sources, stated that he misappropriated HK$50 million of the company's margin funds without permission and then used margin to purchase the Southern 2x leveraged long Hynix ETF (07709.HK).

ETF prices fell sharply

The ETF reached a record high of HK$193.65 per share at the end of June this year, but subsequently fell sharply as the semiconductor sector corrected. As of July 20, the price had fallen to HK$52.58, a drop of more than 72% from its high.

Double leverage amplifies losses

The report, citing Hong Kong financial analysts, stated that the HK$50 million principal amplified into a HK$150 million loss primarily due to the double leverage effect of margin financing and a 2x leveraged long ETF position. The relevant positions have reportedly not yet been forcibly liquidated, and the final loss may still vary depending on stock price fluctuations.