SK Hynix's Volatility Amplifies Leverage ETF Risks; South Korean Government to Study Improvement Measures

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On July 7, as SK Hynix's stock price experienced increased volatility, the yield gap between a leveraged exchange-traded fund (ETF) that tracks double the price fluctuations of SK Hynix's stock expanded to over 5 percentage points. The market indicated that differences in product structure and fund management capabilities are directly reflected in the yields, prompting investors to remain vigilant. Meanwhile, South Korean Deputy Prime Minister and Minister of Economy and Finance, Choo Kyung-ho, stated that discussions are underway to improve measures concerning single-stock leveraged products. However, some opinions suggest that fund management capability is also a crucial factor, in addition to product structure. Due to recent fluctuations in Samsung Electronics and SK Hynix's stock prices, which have seen daily swings of around 10%, fund companies are under greater pressure to manage net asset value deviations and adjust their portfolios in real-time. Following a market crash that day, all 14 single-stock leveraged products related to Samsung Electronics and SK Hynix briefly fell below their listing price of 20,000 won. During a plenary session of the Planning and Finance Committee, Deputy Prime Minister Choo Kyung-ho acknowledged, 'I am very aware of the concerns regarding leveraged ETFs causing significant volatility in the stock market.' He explained, 'When introducing related policies, we considered both the foreign exchange market and the capital market simultaneously, but some issues have arisen. We are discussing how to improve the relevant systems and minimize these problems and negative impacts.'
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