ETF Pioneer Bae Jae-kyu Warns Against Betting on a Rebound, Says Single-Stock Leverage Products Should Fade Away

Korea Investment Trust Management CEO shares views on social media

"Single-stock leverage products should be allowed to die out naturally"

"Memory remains a cyclical industry"

Bae Jae-kyu, chief executive officer of Korea Investment Trust Management, said on July 30 that single-stock leveraged products tied to Samsung Electronics Co. and SK Hynix Inc. should be "allowed to die out naturally rather than be delisted."

Bae is known as the father of South Korea's ETF market after leading the listing of the country's first exchange-traded fund in 2002 while at Samsung Investment Trust Management, now Samsung Asset Management Co.

In a social media post that day, Bae wrote that the issue should not be left to investors alone. He added that the move would be possible with cooperation from asset managers and liquidity providers, along with limited institutional support.

Bae said he understands how leveraged and double-inverse products work. He warned that when volatility rises and prices swing repeatedly, a product's value can erode quickly because of daily rebalancing and compounding.

He said many people think a stock has fallen enough and is due for a rebound, or that they can briefly enter and exit the trade. While that approach may produce gains once or twice, he said, it is difficult to build wealth that way.

Bae also said semiconductors are not easily replaceable in the age of artificial intelligence, but stressed that memory remains a cyclical industry.

Samsung Electronics, SK Hynix and Micron Technology Inc. have announced major investment plans, he wrote. Chinese companies such as ChangXin Memory Technologies and Yangtze Memory Technologies are also rising quickly. As a result, an increase in supply is only a matter of time.

He advised investors to invest across chip design, memory, foundry and equipment. That way, even if one part of the industry weakens, they can still participate in growth across the broader ecosystem.

Lee Su, Hankyung.com reporter, 2su@hankyung.com