Samsung Electronics and SK hynix gain, but semiconductor ETFs deliver mixed results

29The semiconductor heavyweights Samsung Electronics and SK hynix rose by 5.84% and 1.92%. On the same day, strength in semiconductor stocks drove the market to a record high. However, the performance of semiconductor exchange-traded funds (ETFs) varied widely by product.

Some leveraged semiconductor ETFs posted negative returns despite gains in leading stocks. Certain products did not track gains in their underlying stocks directly because of their daily leverage structure and management approach. Other products were reported to have generated positive returns.

Market participants said, “Investors should not buy a product simply because the word semiconductor appears in its name.” The makeup of holdings, the way leverage is applied, and management fees were cited as factors behind differences in returns among ETFs. It was noted that investors should check the holdings of each product.

Even within the same sector, ETFs differ in their holdings weights and tracking methods, resulting in performance differences. It was noted that leverage products, because of their daily rebalancing, can experience greater divergence from their underlying indexes or increased volatility. Differences in returns were observed among asset managers.

In summary, 29large-cap semiconductor stocks were strong that day, but ETF performance was not uniform. The day underscored the need for investors to check an ETF’s holdings and management approach separately.