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Even if the share prices of Samsung Electronics and SK hynix return to current levels in a year, single-stock leveraged exchange-traded funds (ETFs) could suffer losses of up to 75%, according to an analysis.
According to single-stock leverage simulation data released by Hanyang Securities on the 30th, a comparison of the closing prices of Samsung Electronics and SK hynix with their related leveraged ETFs from May 27 to the 22nd of this month showed that when Samsung Electronics shares fell 15.2%, the related leveraged ETFs posted an average return of minus 40.2%. Likewise, when SK hynix fell 18.4%, its leveraged ETFs dropped 49.4%.
The data also included a simulation assuming the same daily fluctuation rates of the underlying assets over the same period but with the final cumulative return set to 0%. The result showed that Samsung Electronics leveraged ETFs posted an average return of minus 14.4%, and SK hynix minus 21.1%.
Even in a scenario where Samsung Electronics shares return to their starting price after six months, the single-stock leverage return was calculated at minus 39.78%. Under the same conditions, the SK hynix single-stock leverage return came to minus 50.27%, meaning the invested capital would be nearly halved.
Extending the period to one year, the losses widened further. Although the underlying Samsung Electronics and SK hynix share prices both return to their starting points, the single-stock leverage products could record losses of minus 63.42% and minus 75.44%, respectively.
This is because leveraged products track twice the daily return of the underlying asset, not the cumulative return over a set period. When share prices swing sharply, the repeated cycle of losses and recoveries erodes principal through a negative compounding effect, so the final return may not match twice the return of the underlying asset.
Hanyang Securities explained, "There are quite a few cases of investing in single-stock 2x leveraged ETFs without fully understanding the product structure. We will expand financial education content so that people can easily understand the characteristics and precautions of financial products, and lead the spread of a sound investment culture."
The financial education content containing this information, titled "Leverage Investment Warning," can be viewed through Hanyang Securities' channels on YouTube, Instagram, and TikTok.
Earlier, Bae Jae-kyu, CEO of Korea Investment Management, also posted a similar analysis on Facebook on the 20th under the title "Performance Analysis of Individual-Stock Leverage and Inverse Products," pointing out that the gap between the theoretical return and the actual return was significant. Bae stated frankly, "Even if time passes and the underlying stock returns to its original level, there is a high chance the ETF price will not," adding, "I hope investors stop investing even now."
Samsung-hynix Leverage Plunges Again by 8–21%
Meanwhile, on the 29th, single-stock leveraged ETFs continued their sharp declines from the previous day, falling by up to more than 40% over two days. According to the Korea Exchange and financial information provider Yonhap Infomax, leveraged ETFs based on SK hynix and Samsung Electronics as single stocks closed down 18–21% and 8–10%, respectively.
This marked a second consecutive day of sharp declines after falling around 28% and 26%, respectively, the previous day. This was because the underlying shares of SK hynix and Samsung Electronics fell 9.61% and 5.23%, respectively.
Despite the plunge in the underlying stocks, trading value across the 16 leverage and inverse products surged that day. The combined trading value of the 16 products reached 15 trillion won, roughly double the 8.2 trillion won of the previous day. This amounted to 36.1% of the total ETF trading value of 41.5371 trillion won that day, higher than the 34.2% share it accounted for the previous day.
On the Day Record Earnings Broke Out, the Stock Broke Down Too
