SK Hynix Drops 7.68%, but Leveraged ETF Closes Up 49.7%

SK Hynix closed 7.68% lower on South Korea's stock market on June 8, but a single-stock leveraged exchange-traded fund tracking the chipmaker surged nearly 50% at the close.

According to the Korea Exchange, Korea Investment Management's ACE SK Hynix Single Stock Leveraged ETF ended at 30,000 won, up 49.7% from the previous session. That came even as SK Hynix, the underlying asset, fell. Comparable single-stock leveraged SK Hynix products from other asset managers dropped 15% to 16% on the day.

The ETF had been trading lower during the session before its price spiked late in the day. Market participants believe the price was sharply distorted as buy orders flooded in while liquidity provider, or LP, quotes were thin near the close. About 47,000 shares changed hands during the closing auction.

Korea Investment Management said LP quotes widened just before the market close, when LPs were no longer required to submit quotes. Investors' market buy orders were executed at that point, driving the price sharply higher, it added. The firm said it would review its LP quoting system and take steps to prevent further problems.

When the market reopens on the next trading day, the ETF's price is expected to converge again toward its underlying value in the 16,000-won range. That means investors who bought the ETF at the inflated late-session price could face losses of more than 40% at the open.

Yang Ji-yoon, Hankyung reporter, yang@hankyung.com