SK Hynix's large fluctuations amplify leveraged ETF risks; South Korean government says it will study improvement measures.

Gold Finance reported that on July 7, as volatility in SK Hynix’s share price intensified, the yield gap between single-stock leveraged exchange-traded funds (ETFs) that track twice the day-to-day price movement of SK Hynix also widened to more than 5 percentage points. The market noted that differences in product structure and fund management capabilities are directly being reflected in yields, and investors need to remain on high alert. Meanwhile, South Korea’s Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said that for single-stock leveraged products, “we are discussing ways to improve the proposal.”

However, some believe that in addition to product structure, fund management capability is also an important factor. Because Samsung Electronics and SK Hynix shares have recently repeatedly seen sharp daily swings of about 10%, fund companies face greater pressure in real-time management of net asset value deviation rates and in adjusting their investment portfolios. After the market plunged that day, all 14 single-stock leveraged products tied to Samsung Electronics and SK Hynix at one point fell below their initial offering price of 20,000 won during trading.

On that day, Koo Yun-cheol said at a plenary meeting of the National Assembly’s Planning and Finance Committee: “I am very well aware of current market concerns that leveraged ETFs are bringing greater volatility to the stock market.” He explained: “When introducing the relevant policies, we also considered the foreign exchange market and the capital market at the same time, but some issues have also emerged.” “We are discussing how to improve the relevant system, and to minimize these issues and negative impacts.”