South Korean leveraged chip ETFs drop 45%, retail investors suffer heavy losses

Huo Xing Finance reports that on July 14, a dozen single-stock leveraged ETFs listed in South Korea at the end of May experienced sharp declines, with several products tracking Samsung Electronics and SK Hynitz seeing their prices nearly halved. Among them, the "SAMSUNG KODEX SK Hynitz Single-Stock Leveraged ETF," with assets under management of $3.4 billion, has fallen approximately 45% since its listing and has retraced more than 60% from its June high. The total assets under management of these related products amount to around $3 billion. On Monday, SK Hynitz recorded a record single-day drop of 15%; on Tuesday, it fell another 8% during trading, causing the KOSPI index to briefly drop 5% and slip below 6,500 points. Jung In Yun, CEO of Fibonacci Asset Management, stated that many retail investors treat leveraged ETFs as long-term investment tools, and the sudden price collapse has led to significant losses, potentially undermining their willingness and ability to continue buying semiconductor stocks. Last month, South Korea’s top financial regulator expressed regret over approving such products for listing, yet retail trading enthusiasm has not noticeably cooled. Over the past month, leveraged and inverse exchange-traded products in South Korea attracted a total of $3.8 billion in net inflows, primarily directed toward single-stock ETFs tracking SK Hynitz and Samsung Electronics. Jung In Yun expects regulators to strengthen suitability requirements, risk disclosures, and investor education rather than impose a full ban on these products. On the same day, the South Korean government raised its 2024 economic growth forecast from 2% to 3%, citing continued demand for AI chips as a factor that will offset part of the drag from Middle East conflicts, and projected a record current account surplus of $290 billion for the year.