Samsung, SK hynix, and related leveraged ETF account for over 70% of trading volume—Concentration issue in Korean stock market worsens
Source: Global Market Broadcast
In South Korea’s $4.3 trillion stock market, retail investors have frenziedly chased leveraged ETFs, to the point where these products, together with the two chip stocks they track, now account for over 70% of total trading volume.
This phenomenon has triggered criticism towards regulators for allowing such high-risk products to exist, and even prompted an opposition party lawmaker to call for their delisting. Since the launch of ETFs tracking twice the daily volatility of Samsung Electronics and SK Hynix at the end of May, volatility has increased significantly. These products are designed to attract more retail capital into the local stock market.
Both Samsung and SK Hynix surged more than twofold at one point this year, and these products, which serve as bullish amplifiers for chip stocks, have become extremely popular among retail investors. However, concerns about large-scale AI investments have made these chip stocks highly sensitive to any supply chain disruptions, resulting in even greater volatility for the associated leveraged ETFs.
According to data compiled by Citic CLSA Securities Korea, on May 26, the day before the launch of the two leveraged ETFs, the trading volume of Samsung and SK Hynix accounted for 31% of the entire Korean stock market. When adding the trading volume of the two ETFs, this ratio reached 84% in late June, and stood at 73% on Tuesday, highlighting the intensifying concentration issue in what is already the world’s most highly concentrated market.
“Leveraged ETFs provide corresponding returns, but fundamentally, someone needs to buy more of the underlying stocks when prices rise and sell more when they fall, in order to maintain a constant leverage ratio,” said Fidelity International portfolio manager Ian Samson. “The volatility brought by retail participation and new leveraged products will only further magnify the real and substantial fundamental uncertainties faced by the Korean semiconductor industry.”
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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