Important change! South Korea's first individual stock leverage ETF, with the initial targets including Samsung and SK Hynix.

Every reporter | Li Lei Every editor | Xiao Ruidong

The reporter from the Daily Economic News learned that a new leveraged exchange-traded fund (ETF) tracking Samsung Electronics and SK Hynix stocks is expected to debut in May in South Korea, offering investors double the daily returns of these two chip giants.

According to local media reports, South Korean financial regulators and industry insiders recently revealed that a leveraged ETF based on Samsung Electronics and SK Hynix stocks is about to be launched. This new product will aim to provide daily positive and negative double returns of the underlying stocks, highly correlating with stock volatility, marking a shift in the market from traditional leveraged ETFs tracking broad indices to more focused investment tools.

Market news also indicates that specific implementation details are expected to be announced within this month, clarifying market capitalization thresholds, trading volume requirements, and derivative hedging conditions. Asset management giant Samsung Asset Management and Korea’s Mirae Asset Global Investments are already preparing related products.

The reporter from the Daily Economic News learned that previously, South Korea prohibited single-stock leveraged ETFs, leading investors to turn to similar products listed overseas. The Southbound East Ying’s SK Hynix Daily Leveraged (2x) product and Samsung Electronics Daily Leveraged (2x) product have become targets for many investors. Related reports show that Southbound East Ying’s Samsung Electronics Daily Leveraged (2x) saw net purchases of $7.46 million from South Korean investors last month, ranking among the most actively traded products on the Hong Kong Stock Exchange.

It is reported that the first batch of listed products will be limited to Samsung Electronics and SK Hynix as the underlying stocks, and South Korean regulators will study the possibility of expanding the range of underlying stocks based on market operations.

As core heavyweight stocks in the South Korean stock market, Samsung Electronics and SK Hynix have become the first targets for single-stock leveraged ETFs, attracting widespread market attention.

According to local media citing South Korean financial regulatory sources, the choice of these two chip giants as pilot projects is mainly based on their market influence and liquidity advantages.

Public data shows that the combined market capitalization of Samsung Electronics and SK Hynix accounts for over 30% of the total market capitalization of the KOSPI index, making them the two most traded stocks in the South Korean stock market. Ample liquidity provides a foundation for the establishment, trading, and hedging operations of leveraged ETFs. At the same time, as global leaders in the memory chip industry, the stock performance of both companies is deeply tied to the global semiconductor cycle, making them core targets of investor attention.

A relevant person from the South Korean Financial Services Commission revealed that the newly launched single-stock leveraged ETF will strictly limit the leverage ratio to 2x, lower than the previously expected 3x, highlighting the regulators’ cautious attitude towards risk control. The product will maintain the leverage ratio through a daily rebalancing mechanism to ensure daily returns are double that of the underlying stocks.

Currently, the specific operational details of the related products still await clarification of regulatory guidelines. According to related reports, the guidelines will focus on three aspects: first, the quantitative admission standards for underlying stocks, including market capitalization and average daily trading volume; second, the operational specifications for derivative hedging, clarifying the conditions and ratios under which ETF managers can use stock index futures and options; and third, the qualification requirements for issuing institutions, focusing on assessing the net asset size and risk management capabilities of asset management institutions.

It is reported that the two asset management giants, Samsung Asset Management and Korea’s Mirae Asset Global Investments, have completed initial preparations. Following the release of regulatory guidelines, they will quickly advance the product application process, aiming for the first batch of listings in May.

Many industry insiders believe that South Korea’s breakthrough of the single-stock leveraged ETF ban is driven by the long-suppressed demand for leveraged investments among local investors and the pressure from capital diversion to overseas markets.

Previously, South Korea only allowed the issuance of leveraged ETFs tracking broad indices, leading many high-risk-tolerant investors to turn to overseas markets like Hong Kong for investment opportunities.

For example, according to Wind data, as of March 23, the two double-leveraged ETFs tracking Samsung Electronics and SK Hynix under Southbound East Ying had net asset values of HKD 7.108 billion and HKD 19.014 billion, respectively, surging by approximately HKD 6.7 billion and HKD 14.026 billion compared to the end of last year.

Related reports also point out that the proportion of South Korean investors is significant. Just last month, South Korean investors net purchased $7.46 million of the Southbound East Ying Samsung Electronics Daily Leveraged (2x) product, reflecting the urgent demand from local investors for related products.

The South Korean Financial Services Commission publicly stated in January of this year that it would expedite the approval process for single-stock leveraged ETFs and gradually relax related restrictions to retain local capital and enhance the competitiveness of the South Korean capital market. The launch of the first batch of products is an important signal indicating a shift in regulatory attitude from “comprehensive prohibition” to “regulated development.”

Subsequently, relevant departments will also assess the possibility of expanding the range of underlying stocks based on the market operation of the first batch of products, potentially including other leading enterprises in the underlying pool. There are also reports that South Korean regulatory authorities plan to restructure the KOSDAQ market next year, launching a “top-tier sector” index composed of leading companies and issuing related ETF products to further enrich the supply of capital market products.

According to statistics from South Korean financial regulators, as of March 20, the net asset size of domestic ETFs in South Korea reached KRW 381.3 trillion (approximately USD 254.2 billion), an increase of nearly 30% since the beginning of the year. Market participants expect the introduction of single-stock leveraged ETFs to enrich the product spectrum of the South Korean ETF market, attract local capital backflow and overseas capital inflow, and promote the continuous expansion of the ETF market scale.

Cover image source: Daily Economic News Media Library

MACD golden cross signal formed, these stocks are performing well!

Massive news, precise interpretation, all in the Sina Finance APP

Editor: Liu Wanli SF014