Samsung and SK Hynix leveraged ETFs post first outflow since May launch

Leveraged ETFs tied to Samsung and SK Hynix lost close to $1 billion in August. The outflow was the first monthly outflow since the products launched in late May. Bloomberg Intelligence data showed that $601 million left funds tracking SK Hynix. Samsung-linked products lost $381 million. The ETFs aim to deliver twice the daily move of the underlying stock. The reversal came as enthusiasm for the AI trade weakened. Regulators also introduced measures aimed at curbing speculative demand. The KOSPI fell 22% in July. Samsung Electronics fell 21.5% during the same period. SK Hynix fell 35.5%. Officials called an emergency meeting after 864.5 trillion won left the market across two sessions. Lawmakers blamed single-stock leveraged ETFs for amplifying the decline. Regulators raised the minimum deposit for new investors. Regulators also mandated a five-day mock trading session. Trading volumes in the products later cooled sharply, according to Bloomberg. Samsung rose 3.63% in August. SK Hynix gained 2.19% in August. Samsung fell 8.7% on Monday after its record shareholder return plan disappointed investors. Retail investors bought about 3.5 trillion won, or $2.5 billion, of equity-linked securities in July, according to the Korea Financial Investment Association. The total was the highest monthly amount since April 2023. Notes tied to Samsung and SK Hynix led the sales. The products advertised annualized coupons of 40% to 50%. Korean buyers suffered losses on similar structured notes during the 2016 Brexit vote. Korean buyers also suffered losses during the 2020 oil crash. They suffered further losses during the China equity slump between 2021 and 2024. The comparison between the ELS coupon strategy and leveraged ETFs depends on whether the chipmakers retain their August gains.