 |
Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] South Korea’s first single-stock leveraged ETFs have attracted nearly KRW 9 trillion ($6.5 billion) in retail investment within just 10 days of their launch, but recent volatility in semiconductor stocks is exposing investors to significant structural risks.
According to financial industry data on June 9, retail investors net bought KRW 3.53 trillion worth of Samsung Electronics leveraged ETFs and KRW 4.46 trillion of SK hynix leveraged ETFs between May 27 and June 8. Combined inflows into the two products approached KRW 8 trillion in less than two weeks.
Additional funds also flowed into inverse products, with KRW 31.9 billion invested in Samsung Electronics 2x inverse ETFs and KRW 53.3 billion in SK hynix equivalents.
The surge in demand has made single-stock leveraged ETFs some of the most actively purchased products among retail investors, with instruments tracking SK hynix and Samsung Electronics dominating recent inflow rankings.
However, growing volatility in semiconductor stocks has raised concerns. On June 8, Samsung Electronics fell 10.2% and SK hynix dropped 7.7%, leading to losses of approximately 20% and 14%, respectively, in their leveraged ETFs.
More notably, cumulative losses have exceeded the expected 2x multiple due to volatility drag. Since launch, Samsung Electronics shares declined 3.7%, while its leveraged ETF dropped about 11%, roughly three times the underlying loss.
Market participants attribute this to the “negative compounding” effect inherent in leveraged products. Because these ETFs are designed to track daily returns at a fixed multiple, repeated price swings can erode returns even if the underlying asset ends near its original level.
For example, if an asset falls 10% and then rises 10%, it ends down 1%. A 2x leveraged product, however, would fall 20% and then rise 20%, ending down 4%, amplifying losses over time.
A similar pattern is evident in SK hynix-related products. While the stock rebounded sharply on June 9 and is down only 1.2% since launch, its leveraged ETF remains down 7.2%.
Experts warn that even if semiconductor stocks recover, losses in leveraged ETFs may not rebound proportionally, highlighting the risks of using such products in volatile markets.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
