Net assets of single-stock leveraged ETFs 17trillion won, volatility widens

Net assets of single-stock leveraged exchange-traded funds (ETFs) at one point grew to 17trillion won, increasing daily volatility in large-cap KOSPI stocks.

10According to the financial investment industry, asset managers operating single-stock leveraged products are using various methods to process rebalancing volumes in a distributed manner.

As mechanical rebalancing of single-stock leveraged ETFs has been coming to market every day recently, large-cap stocks such as Samsung Electronics and SK hynix have surged or plunged 5~13% in a day, and sell-sidecars and circuit breakers have been triggered one after another.

Some political circles have even called for the delisting of single-stock leveraged ETFs.

Financial authorities and the industry are discussing various measures to reduce volatility, including raising margin requirements, promoting products that take opposing positions, strengthening investor education, and expanding the range of stocks eligible for leverage.

Industry officials say asset managers’ capabilities are being put to the test over how to distribute rebalancing volumes and manage tracking discrepancies.

Financial authorities and the financial investment industry are organizing their response around additional disclosures and the results of ongoing discussions.

Investors need to check the net asset size and average daily trading value of single-stock leveraged ETFs, as well as disclosures by asset managers.