The trading board at Hana Bank's dealing room in Jung-gu, Seoul, displays the Kospi and other market indicators on Thursday. The Kospi opened down 323.91 points, or 4.45 percent, at 6,960.50, while the Kosdaq fell 16.11 points, or 1.94 percent, to open at 813.32. [Yonhap]
The trading board at Hana Bank's dealing room in Jung-gu, Seoul, displays the Kospi and other market indicators on Thursday. The Kospi opened down 323.91 points, or 4.45 percent, at 6,960.50, while the Kosdaq fell 16.11 points, or 1.94 percent, to open at 813.32. [Yonhap]

Wild swings in Samsung Electronics and SK hynix shares have sent trading in related single-stock inverse exchange-traded funds into overdrive. With fewer products and smaller market capitalizations than their leveraged counterparts, the inverse ETFs have seen turnover rates surge to extreme levels as volatility spikes.

According to Korea Exchange data released Thursday, the SK hynix inverse ETF recorded a daily trading volume on Wednesday equivalent to roughly 21 times its listed units, pushing its turnover rate to approximately 2,100 percent. The Samsung Electronics inverse ETF posted a turnover rate of around 540 percent on the same day.

Samsung Electronics surged 6.27 percent and SK hynix climbed 8.83 percent on Wednesday from the previous session, triggering sharp losses in the inverse products.

The single-stock inverse ETFs — which seek to deliver twice the daily return in the opposite direction — both fell by double digits. The SOL SK Hynix Futures Single-Stock Inverse 2X dropped 18.22 percent from the previous trading day, while the PLUS Samsung Electronics Futures Single-Stock Inverse 2X fell 12.09 percent.

The ratio of trading value to market capitalization for inverse products has recently been running at far more extreme levels than for standard leveraged ETFs. However, because inverse ETFs have fewer products, smaller market caps and fewer listed units than their leveraged counterparts, a surge in trading during volatile sessions tends to produce a disproportionately high turnover rate.

On Wednesday, the combined trading value of 14 standard leveraged ETFs tracking Samsung Electronics and SK hynix reached 9.03 trillion won ($6.07 billion), equivalent to about 76 percent of their combined market capitalization of 11.86 trillion won. By contrast, the trading value of the two inverse ETFs amounted to roughly 17.2 times their combined market cap — a trading-value-to-market-cap ratio about 23 times higher than that of the leveraged product group.

The relentless back-and-forth in Samsung Electronics and SK hynix shares has made directional bets through single-stock leveraged and inverse products increasingly difficult. With large daily reversals becoming routine, neither the long nor the short side has been able to sustain a trend.

After surging together on Wednesday, both Samsung Electronics and SK hynix turned lower again in early trading Thursday. From June 1 through Wednesday, Samsung Electronics moved more than 10 percent in a single session on four trading days — one sharp gain and three sharp declines. SK hynix logged daily swings exceeding 10 percent on six trading days over the same period, split evenly between three surges and three selloffs.

Adding to the complexity for SK hynix, its American depositary receipt listing has introduced US market supply and demand as a new short-term variable. Price movements and order flows in the ADR and single-stock ETFs after the Korean market closes now feed into the following day's trading in the domestic shares, making near-term direction even harder to gauge. On Tuesday, GraniteShares listed leveraged and inverse ETFs tracking twice and negative twice the daily return of the SK hynix ADR, and Direxion followed Wednesday with its own 2x leveraged ETF. Other asset managers, including Corgi and T-REX, also began trading related products.

Securities analysts, however, said the medium- to long-term outlook for the semiconductor industry remains intact despite the short-term volatility.

Kim Dong-won, head of research at KB Securities, and colleagues said of SK hynix that "the long-term growth trajectory of the AI industry and the memory chip supply-demand environment are essentially unchanged from a month ago," attributing the recent share price decline largely to shifts in investor sentiment. KB Securities maintained its buy rating and target price of 4.2 million won per share on SK hynix.

On Samsung Electronics, the analysts said "the long-term growth potential of the AI infrastructure industry and the core fundamental of a memory chip supply shortage are no different from a month ago." They added that as HBM-focused investment expands, general-purpose memory production capacity is being constrained, and the supply shortage is likely to persist at least through 2028.


kacew@heraldcorp.com