SK Hynix Leverage ETF Plummets 20% Following Warnings from Financial Authorities

The Financial Supervisory Service's concerns over overheating in the market were validated as a single-stock leverage exchange-traded fund (ETF) experienced a sharp decline within a day. SK Hynix and Samsung Electronics, which have been driving the AI semiconductor rally, saw their related leverage ETFs drop by over 20% during trading. With more than 90% of investors being individuals, warnings about high-risk investments are intensifying.
 
According to the Korea Exchange, as of 2:15 PM on June 23, the KODEX SK Hynix Single Stock Leverage ETF was trading at 34,855 won, down 20.78% from the previous trading day. The TIGER SK Hynix Single Stock Leverage ETF also fell by 20.60%, ranking among the top decliners in the domestic market.
 
Products related to Samsung Electronics also suffered significant losses. The TIGER Samsung Electronics Single Stock Leverage ETF dropped 15.08%, while the KODEX Samsung Electronics Single Stock Leverage ETF fell by 14.63%.
 
The sharp decline is attributed to profit-taking by investors after a recent surge in semiconductor stocks. Due to the nature of leverage products, which aim to double the daily returns of their underlying assets, losses have been amplified beyond the decline in the underlying stocks.

Lee Kyung-min, a researcher at Daishin Securities, noted, "The domestic market turned bearish as profit-taking emerged from large-cap semiconductor stocks that had been driving the upward trend. Discussions in the political arena about taxing unrealized gains from stock and real estate investments have also contributed to a decline in investor sentiment."
 
This sudden drop raises concerns about potential losses for individual investors. According to the Financial Supervisory Service, approximately 92% of investors in the Samsung Electronics and SK Hynix single-stock leverage ETFs are individual investors. Since the launch of these products in May, there has been a rapid influx of funds driven by the AI investment boom, pushing total assets over 14 trillion won. However, increased volatility has also heightened the risk of losses.
 
Earlier, Lee Chan-jin, the head of the Financial Supervisory Service, compared single-stock leverage ETFs to a gambling platform during a press briefing, expressing concerns about their excessively high turnover and significant investment risks. He pointed out that the majority of investors are individuals and warned that sudden fluctuations could impact households. He also stated that the Financial Services Commission would review measures to improve the relevant systems.