"Investors Should Stop Even Now"... Asset Manager CEO Warns Against 'Samjeonnix' Leveraged ETF Investments

"Do Not Invest in Single-Stock Leveraged or Inverse ETFs"

"If Volatility of the Underlying Stays High, Daily Losses Will Accumulate"

Bae Jaekyu, CEO of Korea Investment Trust Management, commented on single-stock leveraged Exchange-Traded Funds (ETFs), which have recently been cited as one of the causes of sharp stock price fluctuations, stating, "I hope investors will stop investing in them, even now."

Bae Jaekyu, CEO of Korea Investment Trust Management. Photo by Jin-Hyung Kang aymsdream@

Bae Jaekyu: "Even if the underlying stock returns to its original price, it's difficult for ETF prices to recover"

On July 20, CEO Bae posted a message titled "Performance Analysis of Single-Stock 2x Leverage Inverse" on his Facebook, in which he said, "As the head of an asset management company operating single-stock leveraged ETFs, I am sorry to say this," but nevertheless made his position clear. Korea Investment Trust Management currently manages the "ACE Samsung Electronics Single-Stock Leverage" and "ACE SK hynix Single-Stock Leverage" ETFs.

He explained, "In conclusion, my message is not to invest in single-stock leveraged or 2x inverse ETFs," adding, "Even if, over time, the underlying stock returns to its original price, the ETF price is unlikely to recover to its original level." He further noted, "Especially when volatility in the underlying stock is as high as it is now, the structure results in daily losses," and pointed out, "No one predicted volatility would become this extreme."

Image posted on Facebook on the 20th by Jae-Kyu Bae, CEO of Korea Investment Management. Facebook

According to data CEO Bae released along with his post, the closing price of SK hynix stock fell 17.9% from 2,243,000 won on May 27 to 1,842,000 won on July 16. In contrast, over the same period, the SK hynix single-stock leveraged ETF plunged by 47.5%, and the single-stock inverse ETF also recorded a 31.1% loss.

It is considered unusual for the CEO of an asset management company that launches and manages single-stock leveraged products to publicly express such negative views on the very products they operate. However, CEO Bae has since deleted the post.

'Samjeonnix' Leverage ETFs Attract 7 Trillion Won in a Month

On the 20th, employees are monitoring the stock market and exchange rates in the dealing room at the headquarters of Hana Bank in Jung-gu, Seoul. Photo by Jo Yongjun

The single-stock leveraged ETFs for Samsung Electronics and SK hynix, which were listed at the end of May, have been criticized for further intensifying the market's tilt toward semiconductor stocks. According to the Korea Exchange and ETF CHECK, a net inflow of 7.3364 trillion won was recorded across 16 single-stock leveraged and inverse ETFs from June 16 to July 15.

By product, "KODEX SK hynix Single-Stock Leverage" attracted the largest amount of funds, with 3.4472 trillion won flowing in, topping all ETFs. This was followed by "KODEX Samsung Electronics Single-Stock Leverage" (1.5083 trillion won), "TIGER SK hynix Single-Stock Leverage" (1.4271 trillion won), and "TIGER Samsung Electronics Single-Stock Leverage" (693.8 billion won).

During the same period, the prices of SK hynix and Samsung Electronics stocks fell by 19.49% and 24.33%, respectively. However, the most heavily subscribed ETFs, KODEX SK hynix Single-Stock Leverage and KODEX Samsung Electronics Single-Stock Leverage, plummeted 45.60% and 48.44%, respectively, recording losses much greater than those of the underlying stocks.

'Samjeonnix' Leverage Delisting Controversy... Kim Yongbum: "Hard to Imagine"

As volatility surrounding the Samsung Electronics and SK hynix single-stock leveraged ETFs grew, the financial authorities announced supplemental measures on July 16. As a result, starting August 5, the minimum deposit required to invest in single-stock leveraged ETFs will be increased from 10 million won to 30 million won. In addition, the standard trading unit will be expanded to 20 shares. However, changes to the trading unit will be implemented from November, taking into account securities firms' IT development schedules.

Nevertheless, some point out that these supplementary measures alone will not be enough to address the side effects that single-stock leveraged products have brought to the domestic stock market, and that stronger measures, including delisting, may be necessary.

In response, Kim Yongbum, policy chief at the Presidential Office, appeared on KBS "Sunday Diagnosis Live" on July 19 and commented, "Delisting is hard to imagine." He added, "If delisting occurs, it would itself cause a huge shock to the market, and the question would be how to absorb all those shares put up for sale."

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