Divergent ETF Performance Highlights Market Uncertainty for Samsung, SK Hynix

Leveraged exchange-traded funds (ETFs) tied to South Korea's semiconductor giants, Samsung Electronics and SK Hynix, are exhibiting contrasting returns, creating a peculiar market phenomenon. While the underlying stocks have seen gains, ETFs designed to amplify their performance are splitting, with those tracking SK Hynix rising significantly, while Samsung Electronics-linked ETFs are declining.

This divergence is occurring even as both Samsung Electronics and SK Hynix stocks show upward movement. Analysts attribute this anomaly to the lingering effects of a recent market crash. Liquidity providers are reportedly adjusting their positions and managing "negative basis" – a situation where an ETF's market price falls significantly below its net asset value due to heavy selling pressure. This has impacted how the underlying stock's gains are reflected in the ETF's price.

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The real trigger to lead the stock price rebound of domestic semiconductor companies will be the earnings announcement of U.S. hyperscalers starting with Alphabet on the 22nd and their capital expenditure scale from the end of this month. Solid investment demand is being supported, with the projected increase in the combined capital expenditure growth rate of these companies in the third quarter reaching 92% year-on-year, making it possible to maintain high operating profit margins in the domestic semiconductor industry.

Adding to the complexity, the South Korean government is considering additional regulatory measures for leveraged ETFs. Discussions are underway to address market volatility, following an earlier announcement to increase the minimum deposit requirement for such investments. However, industry experts suggest that regulations alone may not fully curb the mechanical selling pressure inherent in these products.

Consequently, market attention is shifting towards global macroeconomic factors and upcoming earnings reports from U.S. big tech companies. The performance of stocks like Alphabet, set to report earnings soon, is seen as a key indicator. Analysts believe that positive results from these U.S. tech giants could provide the necessary catalyst for a sustained rebound in South Korean semiconductor stocks, including Samsung Electronics and SK Hynix.

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Depending on whether Meta/Amazon's earnings per share (EPS) and Microsoft's capital expenditure figures exceed market expectations, the medium- to long-term rebound strength will be determined.