Retail Investors in Samsung, SK Hynix Leveraged ETPs Lost $1.7 Billion in Three Months
Summary
- Retail investors in single-stock leveraged exchange-traded products were estimated to have posted $1.7 billion in losses over three months.
- The scale of losses from domestic investment in leveraged products tied to single stocks was disclosed in detail for the first time, and the structure tracking Samsung Electronics and SK Hynix shares at a multiple can cause losses to mount quickly.
- As financial authorities tightened regulations on leveraged products tied to single stocks, trading volume fell sharply and the policy stance shifted.
Forecast Trend Report by Period
Retail investors who bought single-stock leveraged exchange-traded products tied to Samsung Electronics Co. and SK Hynix Inc. are estimated to have lost about $1.7 billion over roughly three months.
Bloomberg's analysis of data that the office of People Power Party lawmaker Choi Eun-seok obtained from the Financial Supervisory Service showed that clients at 10 South Korean brokerages lost a combined 2.3 trillion won, or about $1.7 billion, from May 27 through Aug. 14 on single-stock exchange-traded funds and exchange-traded notes linked to Samsung Electronics and SK Hynix.
The data included investment records compiled by major local brokerages including Mirae Asset Securities, Kiwoom Securities, Samsung Securities and NH Investment & Securities. It marked the first detailed public disclosure of losses from investments in South Korea's single-stock leveraged products.
The products were introduced in South Korea in May. They are designed to deliver magnified moves in the underlying shares of Samsung Electronics and SK Hynix, boosting gains in a rally but also rapidly deepening losses when the stocks move the other way.
Volatility increased as leveraged money poured in while South Korea's stock market remained highly sensitive to the artificial intelligence industry and semiconductor shares. Samsung Electronics and SK Hynix are key chipmakers in the global AI supply chain, and shifts in industry conditions and investor sentiment were closely reflected in the performance of the leveraged products.
Financial authorities tightened regulations in July after retail investment in leveraged products overheated. They temporarily suspended new listings of single-stock leveraged products, raised the minimum deposit requirement for investors and strengthened pre-trade education requirements.
Authorities later introduced additional investor-protection measures, including requiring simulated trading for investors in single-stock leveraged ETFs. As regulations tightened, trading volumes in the products fell sharply.
Regulators had originally allowed the products to launch in South Korea in May in part to curb domestic investors' shift into similar leveraged products listed overseas. But after the launch, the risk of retail losses from stock-price swings came into sharper focus, prompting a policy shift toward tighter regulation within just a few months.
