SK hynix singled out as an example amid the spread of single-stock and leveraged ETFs
The ETF market began with low-cost, tax-efficient index tracking. Recently, as single-stock ETFs and products with leveraged structures have increased, there have been criticisms that leverage has become "somewhat excessive," and SK hynix has been cited as the latest example. This combination can change investment risk in terms of the liquidity of the underlying stock and amplified gains and losses.
The early boom in the ETF market was centered on core index products that emphasized low cost and tax efficiency. Recently, product launches combining single-stock ETFs with leveraged structures have become more frequent.
It has been pointed out that this change is testing the market's tolerance for leverage. In the report, leverage was described as "a little carried away".
In the article, SK hynix was mentioned as the latest example. A single-stock ETF is directly exposed to the price movements of one underlying stock.
Leveraged ETFs are designed to amplify movements in the underlying asset by a certain multiple. Because of this, long-term cumulative performance and daily rebalancing effects can cause their results to differ from those of the original asset.
Experts pointed out that liquidity in the underlying stocks and the fund’s operating structure are key. It was summarized that in underlying stocks with low liquidity, large price swings can lead to additional selling and buying by the ETF.
The gist of the article is that when a single stock is combined with leverage, investors can be exposed to losses larger than expected. It recommended checking each product’s structure and whether leverage is applied.
Sources: CNBC Top News
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