Samsung, SK Hynix Single-Stock Inverse ETFs Near 1,000% Daily Turnover

Trading in single-stock leveraged and inverse ETFs tops 402 trillion won over 50 days

Concerns grow over their use as ultra-short-term speculative tools; ruling party lawmaker says 'the tail is wagging the dog'

The turnover rate for single-stock inverse exchange-traded funds tied to Samsung Electronics Co. and SK Hynix Inc. reached 989.8% over the past 50 days. The figure has fueled criticism that the products are being used as ultra-short-term speculative tools, straying from ETFs' original purpose of lowering risk through diversification.

Data the Korea Exchange submitted to the office of Rep. Moon Jin-seok of the National Assembly's Strategy and Finance Committee on July 29 showed that trading in single-stock leveraged and inverse ETFs linked to Samsung Electronics and SK Hynix totaled 338.216 trillion won and 63.8723 trillion won, respectively, from May 27 to July 14. Combined turnover reached 402.0882 trillion won. Over the same period, trading in the underlying shares totaled 643.8 trillion won for Samsung Electronics and 834.47 trillion won for SK Hynix, for a combined 1,478.27 trillion won.

Average daily turnover in the underlying shares remained in the 1% range during the same period, at 1.01% for Samsung Electronics and 1.47% for SK Hynix. Single-stock leveraged ETFs posted a turnover rate of 98.3%, while inverse products reached 989.8%. That was about 10 times the leveraged products and about 92 times the 10.7% turnover rate for KODEX 200, which tracks the Kospi 200.

Turnover rate measures trading value divided by market capitalization and shows how frequently a product changes hands. A 989.8% turnover rate for inverse products means average daily trading value was nearly 10 times their market capitalization. Moon's office said the figures suggest that single-stock leveraged and inverse ETFs are effectively being used for speculative trading aimed at short-term gains rather than for spreading risk across multiple assets.

Samsung Electronics and SK Hynix shares trade at hundreds of thousands to millions of won apiece, requiring relatively larger sums from retail investors. By contrast, single-stock leveraged and inverse ETFs trade at around 20,000 won per share, making them easier to access with small amounts of money. Frequent buying and selling by retail investors seeking to predict moves in the underlying shares and target 2x returns through leveraged and inverse products instead of buying the stocks themselves was also cited as a factor behind the high turnover.

Moon said the current volatility could damp the semiconductor boom if left unresolved. He added that authorities need to examine how excessive turnover in 2x inverse products affected the futures market and how changes in the futures market, in turn, hurt the spot market.

Choi Hae-ryeon, Hankyung.com reporter haeryon@hankyung.com