New regulatory standards introduced for single-stock leveraged ETFs, with individual net purchases exceeding 3trillion won

Delisting criteria for single-stock ETPs have been introduced. The new criteria stipulate that products may be subject to removal if their share of market capitalization is below 5%. In the same trend, single-stock leveraged products were flagged as investment-caution issues.

Trading in single-stock leveraged products by individual investors is becoming concentrated. Individual net purchases of leveraged products linked to Samsung Electronics and SK hynix from TIGER and some asset managers have exceeded 3trillion won. It has been pointed out that this has increased market volatility.

Cases of divergence between leveraged products and their underlying stocks have also been reported in the market. According to reports, there were cases in which related leveraged products fell by 16% during a period when SK hynix rose by 27%. At such times, cases occurred in which investors became confused.

Another example cited was a leveraged product on a day when Hynix common stock fell by 8%,50while the product surged by %. The leveraged product’s return was found to differ substantially from that of the underlying stock. As a result, some investors’ unrealized gains and losses differed significantly.

Overall, single-stock leverage is highly volatile and may result in tracking discrepancies. Regulations were designed to strengthen delisting criteria to reflect these risks. Investors should check the product structure, delisting criteria, and disclosures by the asset manager.