SK hynix’s U.S. listing sparks a surge in leveraged ETFs

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Golden Finance reported that on July 10, SK Hynix’s record-breaking U.S. listing spurred a new round of leveraged products tied to the stock to hit Wall Street. Issuers including ProShares, Leverage Shares, and Rex Shares are preparing to launch products that go 2x long SK Hynix ADR, and some are also preparing inverse products. According to information on the issuers’ websites, at least six products will be launched next week. SK Hynix leveraged ETFs are extremely popular in the South Korean market. SK Hynix, Samsung Electronics, and linked leveraged products together account for more than 70% of trading value in the Korean stock market, intensifying volatility in the KOSPI index. John Cho, portfolio manager of Korea equity funds at JPMorgan Asset Management, said: “Some elements of retail activity appear increasingly momentum-driven, and the growth of single-stock ETF positions magnifies trading volume and volatility in large-cap stocks. The emergence of leveraged ETFs is not a healthy signal and may point to late-cycle retail behavior.” Analysts said that the concentration of single-stock leveraged products has begun to affect the stocks they are meant to track. A new batch of leveraged ETPs listed in the U.S. means that daily rebalancing fund flows will expand, which could further exacerbate volatility in a market that is already elevated.
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