South Korea is set to list 2x leveraged exchange-traded funds tied to Samsung Electronics and SK Hynix by late May, drawing attention to whether money that flowed into Hong Kong-listed products could shift back to the domestic market.
According to the Korea Securities Depository, as of April 24 the Hong Kong holdings of South Korean investors ranked the “CSOP SK Hynix Daily 2X Leveraged ETF (XL2CSOPHYNIX)” seventh and the “CSOP Samsung Electronics Daily 2X Leveraged ETF (XL2CSOPSMSN)” 10th among top stocks by custody value. Their custody amounts were tallied at $104.78 million and $74.11 million, respectively, totaling nearly 264 billion won.
Both rank and size rose from the end of March, when the two products stood at 10th ($54.95 million) and 11th ($43.45 million). With upbeat expectations for the semiconductor cycle persisting, domestic demand has continued to move into Hong Kong, where single-stock 2x ETFs have been available while such products were not allowed in South Korea.
The underlying shares also climbed sharply from April 1 to 24: Samsung Electronics rose 31.28% and SK Hynix gained 51.43%. Over the same period, South Korean investors’ Hong Kong trading was concentrated in the two ETFs. The SK Hynix 2x ETF saw purchases of $40.27 million and sales of $48.96 million, while the Samsung Electronics 2x ETF recorded $23.75 million in buys and $19.36 million in sells.
With the domestic launch of single-stock leveraged ETFs approaching on May 22, the financial investment industry is discussing the possibility that demand headed to Hong Kong could return to South Korea. Domestic listings are seen as more convenient because Hong Kong ETFs require converting won into Hong Kong dollars and factoring in currency gains or losses, while domestic ETFs can be traded without separate currency exchange. Tax treatment also differs: overseas-listed ETFs are subject to capital gains tax on trading profits, while trading gains on domestically listed ETFs are effectively not taxed.
“One big reason demand moved to Hong Kong was the lack of single-stock leveraged products in South Korea,” a financial investment industry official said. “After domestic listing, the lack of currency-conversion burden and the tax advantages could lead to a shift of funds into domestic ETFs, especially among retail investors.”
* This article has been translated by AI.
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