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Samsung Electronics and SK Hynix-Linked Leveraged Products Debut in S Korea; G Sachs Warns of Higher Market Concentration and Volatility
More than a dozen single-stock 2x leveraged products linked to two heavyweight stocks, Samsung Electronics and SK Hynix, debuted in the domestic market of S Korea yesterday (27th)....
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Samsung Electronics and SK Hynix-Linked Leveraged Products Debut in S Korea; G Sachs Warns of Higher Market Concentration and Volatility
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More than a dozen single-stock 2x leveraged products linked to two heavyweight stocks, Samsung Electronics and SK Hynix, debuted in the domestic market of S Korea yesterday (27th). The sales and trading division of G Sachs believes such leveraged products may deepen market concentration and intensify volatility.

In a report, the division noted that the 16 products launched yesterday have total assets of KRW4.3 trillion (approximately USD2.8 billion). These single-stock leveraged products, previously banned locally (prohibited from being labeled as ETFs), have attracted a large number of retail investors seeking to increase their bets on the two heavyweight stocks.

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As of Wednesday, the Korea Composite Stock Price Index (Kospi) has surged 95% year to date, becoming one of the hottest equity markets globally, mainly driven by the two chip giants. The report said these new products require daily rebalancing to maintain their leverage ratios, forcing funds to buy during rallies and sell during declines, a mechanism described as a volatility "accelerator."

This vulnerability became evident on Thursday (28th), when the Kospi once fell 4.7%, while Samsung Electronics dropped 6.4% and SK Hynix declined 4.1%. A leveraged product tracking Samsung Electronics plunged nearly 10%. The market's reliance on the two stocks also poses risks, as they account for about 50% of the Kospi weighting. The report pointed out that any shock to the semiconductor sector will now be amplified by the mechanical selling of these multi-billion-US-dollar funds, potentially triggering broader index instability. (da/u)

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