SK Hynix’s sharp fluctuations amplify leveraged ETF risks; South Korean government says it will study and improve measures

格隆汇 July 7th｜As the share price volatility of SK Hynix intensifies, the yield gap between single-stock leveraged exchange-traded funds (ETFs) tracking twice the price movements of SK Hynix shares has widened to more than 5 percentage points. The market points out that differences in product structure and fund management ability are directly reflected in returns, so investors need to remain vigilant. Meanwhile, Korean Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated that an “improvement plan is under discussion” regarding single-stock leveraged products. However, some opinions suggest that, aside from product structure, fund management ability is also an important factor. Recently, a certain exchange and SK Hynix shares have experienced repeated intraday fluctuations of about 10%, putting greater pressure on fund companies to manage net asset value deviation rates in real time and adjust their investment portfolios. After the market plummeted that day, 14 single-stock leveraged products related to a certain exchange and SK Hynix all briefly fell below their initial listing price of 20 thousand Korean won during intraday trading. Deputy Prime Minister Choo Kyung-ho stated at the plenary meeting of the National Assembly’s Planning and Finance Committee that, “I am well aware that there are concerns about leveraged ETFs introducing significant volatility into the stock market.” He explained, “When the relevant policies were introduced, both the foreign exchange market and the capital market were taken into account, but some issues have now arisen as well. We are discussing how to improve the relevant system and minimize these problems and negative impacts.”