Samsung and SK Hynix Leveraged ETFs Post First Outflow Since May Launch

Leveraged exchange-traded funds (ETFs) tied to South Korea’s two biggest chipmakers shed close to $1 billion in August. 

The withdrawals mark the first monthly outflow since the products launched in late May. The reversal comes as enthusiasm around the AI trade has weakened and regulators have introduced measures aimed at curbing speculative demand.

Leveraged Chip ETFs in South Korea Snap Inflow Run

Data compiled by Bloomberg Intelligence shows $601 million left the funds tracking SK Hynix, while Samsung-linked products lost $381 million. The ETFs aim to deliver twice the daily move of the underlying stock.

The reversal follows a brutal July for Korean equities. The KOSPI sank 22% that month. Samsung Electronics fell 21.5% over the same period. 

SK Hynix dropped 35.5%, deepening losses for retail traders who had piled into double-leveraged wrappers.

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 slide.

Regulators responded by raising the minimum deposit for new investors. They also mandated a five-day mock trading session. Trading volumes in the products cooled sharply afterward, according to Bloomberg.

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Retail Money Rotates Into ELS

Both chipmakers have steadied since. Samsung is up 3.63% in August, and SK Hynix has gained 2.19%, though Samsung slid 8.7% on Monday after its record shareholder return plan disappointed the investors.

Cooling ETF demand has not ended Korean risk appetite. Instead, mom-and-pop traders moved into equity-linked securities (ELS), advertising annualized coupons of 40% to 50%.

About 3.5 trillion won, or $2.5 billion, of ELS products were sold in July, according to the Korea Financial Investment Association. This was the highest monthly total since April 2023, led by notes tied to Samsung and SK Hynix.

The structured notes carry their own history of losses, having burned Korean buyers during the 2016 Brexit vote, the 2020 oil crash, and the China equity slump between 2021 and 2024. 

Whether the coupon chase proves steadier than the leverage trade depends on how the chipmakers hold their August gains.

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