SK Hynix Leverage Funding Costs Plunge as ADR Listing, AI Selloff Ease Crowding

The cost for global investors to fund leveraged bets on SK Hynix Inc. has dropped by about half in recent weeks as demand for concentrated exposure eased after the company’s US American depositary receipt listing and a sharp correction in artificial intelligence-related shares.

Bloomberg reported on August 20 that global investment banks including Bank of America, Citigroup, Goldman Sachs Group Inc. and JPMorgan Chase & Co. have recently quoted clients rates of about 150 to 300 basis points over the Secured Overnight Financing Rate, or SOFR, for swap exposure to SK Hynix’s locally listed shares.

That is sharply lower than in mid-June, when some banks sought spreads of more than 1,000 basis points over SOFR for new swap contracts or renewals of existing positions. SOFR has traded between 3.50% and 3.69% since May.

At the time, SK Hynix shares had surged about elevenfold from June 2025 through June 22, 2026, driven by the AI investment boom. Bullish bets by global investors became heavily one-sided. As banks’ swap exposure tied to SK Hynix grew too large, they demanded steeper spreads or declined new trades outright to manage risk.

That dynamic has shifted recently. After SK Hynix issued ADRs in the US last month, overseas investors gained another route to bet on the stock’s upside beyond swaps linked to the Korea-listed shares. A global technology selloff in July also cut existing leveraged positions substantially. Some banks that had previously rejected new trades have started seeking clients again, Bloomberg reported.

Concerns about stretched valuations in AI stocks spread last month, triggering a sharp correction in South Korea’s equity market. The Kospi index tumbled 22% in July, its biggest monthly drop since October 2008. SK Hynix and Samsung Electronics Co. together account for about half of the Kospi’s market value, leaving the benchmark highly exposed to a selloff in chip shares.

Investor enthusiasm for leveraged products also cooled quickly. Assets in CSOP Asset Management’s Hong Kong-listed SK Hynix leveraged exchange-traded fund shrank to less than one-third of their June 25 level, falling below $5 billion as of August 19. The fund was designed mainly to use swaps to deliver twice the daily return of SK Hynix’s locally listed shares, but it is now managed so its leverage can be adjusted daily up to a maximum of two times.

A swap is a derivative that allows investors to capture the economic returns from a stock’s price moves without directly owning the underlying shares. Global funds investing in markets including South Korea, China and India sometimes use swaps instead of buying stocks outright because of capital regulations, taxes, anonymity and the ability to use leverage.

Bloomberg said the drop in funding costs signals that concern in the banking sector over concentrated SK Hynix risk has eased. A recent Bank of America survey of Asian fund managers also showed investors in Asia excluding Japan reducing exposure to technology and cyclical stocks and shifting toward defensive shares.