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Korean Leveraged Chip ETFs Plummet 45%, Retail Investors Suffer Heavy Losses

On July 14, over a dozen single-stock leveraged ETFs listed in South Korea at the end of May saw significant declines, with multiple products tracking Samsung Electronics and SK Hynix nearly halving in price. Among them, the 'SAMSUNG KODEX SK Hynix Single-Stock Leveraged ETF,' with assets of $3.4 billion, has fallen approximately 45% since its listing, retreating over 60% from its June peak. The total assets under management of related products amount to about $3 billion. On Monday, SK Hynix recorded a record drop of 15%; on Tuesday, it fell further by over 8% during intraday trading, while the KOSPI index once declined 5% and fell below the 6,500 mark. Jung In Yun, CEO of Fibonacci Asset Management, stated that many retail investors treat leveraged ETFs as long-term investment tools, and the sharp decline has caused them significant losses, potentially weakening their willingness and ability to continue buying semiconductor stocks. South Korea's top financial regulator last month expressed regret over approving the listing of such products, but retail trading enthusiasm has not notably cooled. Over the past month, leveraged and inverse exchange-traded products in South Korea attracted a total of $3.8 billion in inflows, primarily directed toward single-stock products tracking SK Hynix and Samsung Electronics. Jung In Yun expects regulators to strengthen suitability requirements, risk disclosures, and investor education rather than fully suspending the products. On the same day, the South Korean government raised its economic growth forecast for this year from 2% to 3%, citing continued demand for AI chips to offset some of the drag from Middle East conflicts, and projected a record current account surplus of $290 billion this year.

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