Single-stock leveraged ETFs surge and plunge; individual net purchases 3trillion won
A major divergence from the underlying stock occurred in a Hynix-related single-stock leveraged ETF, while net purchases by individual investors exceeded 3trillion won. The exchange introduced a delisting criterion for cases in which the market-capitalization share is below 5%.
A major divergence from the underlying stock was observed in single-stock leveraged exchange-traded funds (ETFs). In one case, when Hynix common stock rose 16%, these ETFs were reported to have fallen 27%. The divergence mainly appeared in stocks that saw concentrated buying by individual investors. In another case, when Hynix common stock fell 8%, the leveraged ETF was also seen to surge 50%. Asset managers explained that the leveraged structure and intraday rebalancing method affected the calculation of returns. As a result, intraday volatility increased. Individual investors concentrated their purchases on related products, including Mirae Asset's Samjeonix single-stock leveraged ETF, bringing net purchases to 3trillion won. Orders were dispersed among single-stock leveraged products from several issuers. Trading value and volume for the related products increased. The exchange introduced a delisting criterion for single-stock ETPs. Under the criterion, a product is subject to delisting if its market-capitalization share is below 5%. The criterion was included in a recent regulatory amendment. Experts explained that repeated rises and falls could increase the possibility of investment losses. Leveraged products are structured to amplify daily returns. Their structural vulnerability to short-term fluctuations was also noted. 9 days after the single-stock leveraged product was excluded from the investment-caution designation. Cases of sharp rises and falls in related products were reported both before and after the exclusion. This decision and the introduction of the regulation were matters that proceeded simultaneously in the market.