Single-stock leveraged ETF net assets17surge by trillions of won sends markets into turmoil
As the net assets of single-stock leveraged exchange-traded funds (ETFs) at one point swelled to nearly17trillion won, rebalancing flows increased volatility in large-cap KOSPI stocks. Sell-sidecars and circuit breakers were triggered one after another, while asset managers are using measures to spread out rebalancing while minimizing tracking discrepancies.
As the net assets of single-stock leveraged ETFs at one point swelled to nearly17trillion won, the daily rebalancing flows increased volatility in large-cap KOSPI stocks. This became a burden for investors and market operations.
According to the financial investment industry, concerns have been raised that the mechanical rebalancing flows of single-stock leveraged ETFs could intensify selling and buying pressure on the underlying stocks. The recent surge in net assets has highlighted these concerns.
Asset managers are reportedly using various measures, including spreading out trades, to avoid releasing rebalancing flows into the market all at once. At the same time, minimizing tracking discrepancies remains a challenge.
Recently, large-cap stocks such as Samsung Electronics and SK hynix surged and fell sharply in a single day by around 5∼13%, resulting in cases where sell-sidecars and circuit breakers were triggered. In this process, the role of single-stock leveraged ETFs was identified.
Some in political circles called for the delisting of certain products, while others argued that opposing-position products should be activated to offset supply and demand within the market. One researcher expressed the view that increasing opposing positions in the market was the solution.
Both management practices and market stability became subjects for review. The related discussions are expected to affect regulatory and operational practices going forward.
Sources: 연합인포맥스
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