Leveraged chip ETFs lure W7tr in 1 month despite chip rout

Samsung Electronics (left) and SK hynix logos (Yonhap)

Single-stock leveraged exchange-traded funds tracking the country's top chipmakers drew more than 7 trillion won ($4.73 billion) in net inflows over the past month, even as the underlying shares tumbled amid a semiconductor selloff.

Sixteen single-stock leveraged ETFs tracking Samsung Electronics and SK hynix, including two inverse products, attracted a combined 7.34 trillion won in net inflows between June 16 and Wednesday, according to the Korea Exchange on Friday.

The Kodex SK hynix Single Stock Leverage ETF drew the largest inflow at 3.45 trillion won, the highest among all ETFs listed in Korea during the period.

It was followed by the Kodex Samsung Electronics Single Stock Leverage ETF, which attracted 1.51 trillion won, and the Tiger SK hynix Single Stock Leverage ETF with 1.43 trillion won. The Tiger Samsung Electronics Single Stock Leverage ETF recorded an additional 693.8 billion won in net inflows.

The strong inflows came even as the underlying chipmakers suffered steep losses: Samsung Electronics fell 17.06 percent, while SK hynix lost 9 percent over the same period.

The leveraged ETFs fared even worse, plunging more than 30 percent over the period. Samsung Asset Management's Kodex products lost more than 40 percent.

Modest curbs on leveraged ETFs

Leveraged chip ETFs have been blamed for amplifying market volatility, pushing Korea to tighten restrictions on the products.

Under the new rules, the minimum deposit requirement for investors will be raised to 30 million won from the current 10 million won.

ETFs will also be subject to a minimum trading unit of 20 shares, instead of the current one-share increment, a move expected to dampen trading activity.

Regulators will suspend new listings of leveraged ETFs tied to individual stocks.

However, analysts questioned whether the measures would be enough to curb speculation.

"The market appears to be interpreting the measures as only a modest tightening of the existing regulations. Since the announcement, disappointment-driven selling in Samsung Electronics and SK hynix has emerged on the after-hours market," said Kang Jin-hyuk, an analyst at Shinhan Securities.