Soaring Over Tenfold Within the Year: The Frenzy Over SK Hynix Leveraged Products

Source:Shanghai Securities News

Fueled by intense market capital interest in memory chips, as of June 22, the South China Double Long SK Hynix ETF has seen its year-to-date gains break through tenfold. Concurrently, the ETF's asset scale has skyrocketed by over twenty times compared to the end of last year.

However, industry insiders caution that against the backdrop of semiconductor sector valuations being at historical highs and growing divergence between bullish and bearish sentiments, the risks of leveraged products magnifying losses in both directions are accelerating. Retail investors need to maintain a sufficiently prudent attitude towards such instruments.

South China Double Long SK Hynix ETF Surges Over Tenfold Year-to-Date

Since 2026, the global semiconductor rally has continued its furious pace. In the A-share market, core storage stocks like GigaDevice, Deming Li, and Jiangbolong have persistently climbed; overseas market fervor remains unabated, with South Korean memory giant SK Hynix's stock price continuing its ascent. On June 22, SK Hynix briefly surpassed Samsung Electronics in market capitalization during trading hours, touching the top spot in the South Korean stock market. Its closing price rose 5.61% on the day.

Previously, SK Hynix announced it had delivered samples of its 12-layer HBM4E to key customers. This product is a new-generation high-performance DRAM designed for AI scenarios.

According to industry observers, compared to HBM4, HBM4E achieves dual upgrades in performance and energy efficiency, with a maximum pin speed reaching 16 Gbps and energy efficiency improving by over 20%. Leveraging a new interface and architecture design, it can reduce transmission latency and maintain stable operation under high-bandwidth conditions, thereby enhancing both the data processing capabilities for AI training and inference and the overall computational efficiency of next-generation AI data centers and large-scale computing systems.

Zhou Jingxiang, Fund Manager of Noah Research Select Fund, told the Shanghai Securities News reporter that the core driver of this memory upcycle stems from the explosive demand for SSD storage driven by AI inference computing power, and industry prosperity may trend upward throughout the year.

Leveraged ETFs linked to core chip leaders like SK Hynix and Samsung Electronics have also experienced epic-level market performance.

As of the close on June 22, the South China Double Long SK Hynix ETF listed in the Hong Kong market surged 16.55% in a single day, with year-to-date cumulative gains reaching a staggering 1061.92%. The product officially debuted on the Hong Kong Stock Exchange on October 16, 2025, with an initial size of approximately HK$24 million. However, as the storage rally intensified, the product's scale experienced explosive growth – reaching $14.418 billion as of June 18, a meteoric rise of 21.7 times from $636 million at the end of last year.

The South China Double Long Samsung Electronics ETF has also seen substantial capital inflows. Data shows that as of June 18, its size reached $4.4 billion. Following a 215.96% surge in scale in May, its size has grown by over 50% again since June.

However, dissecting the capital structure reveals that the leveraged ETF trading market currently exhibits a highly distinct feature of retail investor dominance, with institutional capital largely absent.

"The vast majority of institutions do not allocate to leveraged ETFs; only a small number of hedge funds use them as tools for short-term swing trading," a senior foreign fund manager candidly told this newspaper. Long-term allocation funds like pensions seek stable, long-term returns, which are completely mismatched with the high-volatility, high-risk return profile of leveraged products. Individual investors constitute the core purchasing group for such products.

Beware of Potential Volatility Risks

From an industry perspective, leveraged ETFs are typical "double-edged swords" that amplify both returns and risks. They can multiply investment returns during upward market phases; however, when the market turns downward, the magnitude of losses is similarly magnified. With growing divergence in global semiconductor sector outlooks and multiple uncertainties intertwining across geopolitics, industry dynamics, and valuations, the hidden risks within leveraged ETFs are continuously being exposed. Investors need to remain highly vigilant.

Recent severe market volatility has vividly demonstrated the destructive power of leveraged product losses. The South Korean Financial Supervisory Service's monitoring report released on June 18 showed that during the period from May 27 to June 12, while the underlying Samsung Electronics stock experienced a maximum drawdown of 18.0%, the corresponding two-times leveraged long ETF suffered a maximum drawdown of 35.9%, with losses nearly doubling. The SK Hynix stock drawdown was 19.1%, but its two-times leveraged ETF drawdown expanded further to 38%. Regulatory authorities have repeatedly warned that with South Korean individual stocks having a daily price limit of ±30%, two-times leveraged products theoretically face maximum single-day losses of up to 60%. Under extreme market conditions, principal capital can be severely depleted.

Beyond the routine amplification of volatility risk, leveraged ETFs have also experienced extreme abnormal scenarios where their price action completely diverges from the underlying stock, inflicting massive losses on retail investors chasing highs in the short term. In early June this year, a two-times leveraged ETF tracking SK Hynix exhibited divergent performance for two consecutive trading days: On June 8, while the underlying SK Hynix stock fell nearly 8%, the ETF surged nearly 50% against the trend; the next day, when the underlying stock rose sharply over 13%, the ETF plummeted by 40% intraday.

Addressing this abnormal volatility, the product issuer, Korea Investment Management, explained that the root cause was insufficient market maker liquidity. During the closing auction period, market makers are not obligated to provide mandatory quotes. A large volume of market buy orders pushed the fund price higher, creating a significant premium. When market liquidity recovered the following day, prices rapidly converged to fair value, causing substantial drawdowns for investors who entered at the previous day's elevated prices.

A fund analyst in Shanghai systematically dissected multiple potential risks of leveraged ETFs, both long-term and short-term: Firstly, due to the derivative structure employing daily leverage resetting, high market volatility environments can lead to time decay. Even if the underlying stock price returns to its previous high, the fund's net asset value may still suffer permanent losses. Secondly, leverage amplifies both gains and losses. With the overall semiconductor sector valuation currently at historical highs, any collective pullback would trigger drawdown impacts far exceeding those of the underlying stocks. If concentrated redemptions occur after sustained product scale inflation, it could also trigger a liquidity spiral, further exacerbating price declines. Thirdly, the trading volume of leveraged products in the South Korean market is nearing that of leading chip stocks themselves. Massive retail capital concentrated in one-sided bets creates a positive feedback loop, continuously boosting buying pressure during rallies, while batch stop-loss selling accelerates declines during downturns, significantly elevating market fragility.

Uncertainties at the industry chain fundamental level can also amplify the volatility risks of leveraged products. Sheng Jin, Portfolio Director at Value Partners, told this newspaper reporter that the semiconductor industry chain is long and deeply intertwined with globalized specialization. The variables affecting valuations are complex and intertwined. Any single variable, such as a company's quarterly earnings falling short of expectations or adjustments in global industrial policies, can quickly disrupt existing valuation logic, triggering violent sector fluctuations, which high-leverage products will synchronously magnify in impact.