Leveraged exchange-traded funds tied to Samsung Electronics (SSNLF) and SK Hynix (HXSCL), two major South Korean chipmakers positioned at the center of the global AI supply chain, have suffered steep declines after attracting strong demand from retail investors seeking amplified returns. More than a dozen leveraged products tracking the two companies have nearly halved since listing in late May, according to Bloomberg-compiled data. The SAMSUNG KODEX SK Hynix Single Stock Leverage fund, the largest of the group with $3.4 billion in assets under management, has fallen about 45% from its debut and more than 60% from its June peak. The losses suggest that investors who treated these products as longer-term holdings rather than short-term trading instruments may now face substantial pressure on both capital and risk appetite.
The decline accelerated after SK Hynix shares recorded a 15% drop in Seoul on Monday as concerns increased that the global AI stock rally had become overextended. Goldman Sachs Group (GS), a global financial services company, said in an institutional sales-and-trading note that rapid deleveraging by single-stock leveraged ETFs forced aggressive rebalancing and contributed to the downward move. The firm estimated that the activity represented 62% of local institutional net selling on Monday. Because leveraged fund issuers typically buy into rising markets and sell into falling markets to maintain their targeted exposure, these products may intensify volatility and could make a recovery in Korean semiconductor stocks more dependent on foreign institutional inflows.
The Seoul-listed products launched in late May with $3 billion in combined assets before expanding beyond $10 billion at their June peak, following the strong popularity of similar instruments in Hong Kong. Their rapid growth and subsequent losses have increased criticism of South Korean regulators, who had previously prohibited the products before allowing them during the market boom. Despite the selloff, investor demand appears to remain active, with leveraged and inverse exchange-traded products attracting $3.8 billion in inflows over the past month, driven mainly by funds tracking Samsung and SK Hynix. Fibonacci Asset Management Chief Executive Jung In Yun said regulators may respond with tighter suitability standards, stronger risk disclosures and greater investor education rather than banning the products outright.