SEOUL, July 27 (AJP) —The chip-linked leveraged ETF frenzy that turned South Korea into a proving ground for AI-fueled speculative trading is poised to spill over to Japan.
U.S. asset managers are seeking to launch the first single-stock leveraged exchange-traded funds tied to Japanese chipmaker, modeled after single-stock instruments on Samsung Electronics and SK hynix to ride on the AI chip fever.
According to Bloomberg on Monday, U.S. firms including Kogi Strategies, GraniteShares and Turtle Capital have filed to list leveraged and inverse ETFs tracking Kioxia shares and its American depositary receipts. At least nine products, including 2x leveraged and inverse ETFs linked to Kioxia, are currently under review by U.S. regulators.
If approved, the products would mark the first U.S.-listed single-stock leveraged ETFs based on a Japanese company.
Supporters expect strong demand for the products as investors continue to pour into AI-related stocks, while critics warn they could further amplify volatility.
The concern stems from the way leveraged ETFs operate. Because the funds must rebalance their positions at the end of each trading day to maintain their target exposure, those large trades can add to market volatility and make price swings bigger.
"The experience in South Korea shows that leveraged ETFs distort normal market mechanisms and significantly increase volatility," Andrew Jackson, head of Japanese equity strategy at Ortus Advisors, told Bloomberg.
He added that such products could further fuel speculative trading in AI-related shares and create a more challenging environment for long-term investors.
Bloomberg pointed to South Korea as a recent example. Rapid growth in leveraged ETFs tied to Samsung Electronics and SK hynix was followed by wider market swings, prompting regulators to suspend approvals for new single-stock leveraged ETFs.
The debate also come as Kioxia has become one of Japan's most volatile large-cap stocks. After briefly becoming the country's most valuable listed company during the AI rally, its shares have fallen about 42 percent over the past month to 51,350 yen on Monday and are down about 3.3 percent over the past five trading days.
Meanwhile, U.S. issuers are also targeting other major Japanese stocks. Turtle Capital has also filed for leveraged ETFs tied to SoftBank Group, Nintendo and bitcoin-focused Metaplanet. Direxion and Themes ETF Trust are separately seeking similar products linked to Tokyo Electron, Toyota Motor and Lasertec.
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