Korean leveraged ETF blamed for memory chip stock volatility, Japanese media warns

A Japanese media outlet has identified a single-stock leveraged Exchange Traded Fund (ETF) launched in South Korea as a significant factor behind the wild swings in memory chip stocks. The Nikkei reported that the market for these specialized ETFs has expanded dramatically, with total assets surpassing $50 billion (approximately 75 trillion won) by the end of last month, more than doubling in just one year.

The surge in memory chip stocks has been fueled by the successive launch of products based on these stocks this year. The Nikkei specifically highlighted the SK Hynix single-stock leveraged ETF, introduced in May. Analyzing data from its affiliate, QUICK, the Japanese newspaper found that the annualized volatility of SK Hynix's common stock over the past 20 days exceeded 110%.

This level of volatility is more than seven times that of the S&P 500, the benchmark U.S. stock index, which typically hovers around 15% annualized. The report suggests that these leveraged ETFs, designed to amplify market movements, are exacerbating the price fluctuations of semiconductor stocks, raising concerns about market stability.