"48% Plunge in a Single Day"—Unbelievable? Samsung Electronics and SK hynix Leverage ETFs Face Calls for Delisting

The Bank of Korea: "Concerns Over Market Concentration and Rising Volatility"

Ahn Cheol-soo: "Financial Authorities Must Be Held Accountable and Dismissed"

The KOSPI index started off with a sharp decline on the 2nd, with the KOSPI and KOSDAQ indices displayed on the status board in the dealing room of Hana Bank in Jung-gu, Seoul. Photo by Yonhap News

The debate over regulating single-stock leveraged exchange-traded funds (ETFs) is spreading from financial authorities to the political sphere. Following a warning from the Bank of Korea regarding the potential for market concentration and increased volatility caused by leveraged ETFs focused on Samsung Electronics and SK hynix, some political figures are now calling for the possibility of delisting these products to be considered.

The Bank of Korea: "Concentration Could Heighten Market Instability"

The concern is that, given the overwhelming weight of Samsung Electronics and SK hynix in the domestic stock market, if funds flow in a particular direction through leveraged ETFs, price fluctuations could be amplified.

In particular, it was analyzed that if spot and futures transactions that occur during daily rebalancing are repeated, stock price movements could become excessive, which may in turn increase the risk of losses for individual investors.

48% Wiped Out in a Single Day... The Agony of Leverage

According to KOSCOM, the SK hynix single-stock leveraged ETPs (ETF and ETN) posted cumulative returns of 29% to 41% from their launch on May 27 through June 23. However, as of the close on June 22, the previous trading day, the returns had ranged from 75% to 89%, showing a dramatic drop in just one day. For example, the cumulative return for the KODEX SK hynix Single-Stock Leverage ETF fell from 87.63% to 39.82%, a decrease of 47.81 percentage points.

Such sharp fluctuations are rooted in the structure of leveraged products. These products track 'twice the daily return,' rather than a set period's return, so when gains and losses alternate, returns may become distorted. In particular, if a decline occurs after a peak, the cumulative losses can feel especially severe.

Ahn Cheol-soo: "Consider Delisting Samsung Electronics and SK hynix Leverage ETFs"

The idea of delisting has even emerged in political circles. Ahn Cheol-soo, a lawmaker from the People Power Party, identified leveraged ETFs on Samsung Electronics and SK hynix as major drivers of stock price volatility, urging that delisting these ETFs be considered.

Ahn Cheolsoo, member of the People Power Party. Photo by Yonhap News Agency

On July 6, Assemblyman Ahn stated on Facebook, "The KOSPI has turned into a casino. The 212 trillion won in funds concentrated in Samsung Electronics and SK hynix leverage ETFs is amplifying stock price volatility," adding, "Due to daily rebalancing and profit-taking attempts, the market is reeling, and the KOSPI Fear Index has soared to an unprecedented 90.8."

He continued, "The original goals of attracting overseas investment back into Korea and defending the exchange rate have also fallen short. Of the 11 trillion won invested in Samsung Electronics and SK hynix leveraged products on the Hong Kong stock market, only 500 billion won has flowed into Korea, and the exchange rate is fluctuating above 1,550 won. All 14 Samsung Electronics and SK hynix leveraged products launched have shown negative returns over the past month, with losses reaching up to 35.9%."

He argued, "The Samsung Electronics and SK hynix leverage ETFs have been a complete policy failure. They are eroding corporate value and the wealth of the people by several trillion won every day. Strong corrective measures, including the possibility of delisting, are needed to restore normalcy to the stock market."

He also insisted, "President Lee Jaemyung should hold the Chairman of the Financial Services Commission and the Governor of the Financial Supervisory Service accountable and dismiss them. Both leaders have failed in forecasting, response, and devising countermeasures. If the current 'roller-coaster KOSPI' trend continues, our stock market will be regarded globally as an unpredictable market full of speculative stocks."

This content was produced with the assistance of AI translation services.