FSS Issues Consumer Alert on Single-Stock Leverage Products Tied to Samsung Electronics and SK hynix

[Financial News] The Financial Supervisory Service (FSS) issued a consumer alert at the "caution" level on the 18th for single-stock leverage and inverse products, or single-stock leverage products. The move came as individual net buying in these products topped 8 trillion won after listing, while cases were confirmed in which product prices fell to about twice the decline of the underlying asset during a stretch of consecutive losses.
The FSS urged investors to make careful decisions, noting that losses can double in a single day and that performance may fall short of expected returns because of the "negative compounding effect."
Earlier, single-stock leverage products based on Samsung Electronics and SK hynix were listed on the 27th of last month. Their market capitalization, which stood at 450 billion won just before listing, surged to 9.6 trillion won as of the 12th, up 5.1 trillion won, or 113%, in just 12 trading days.
Over the same period, individual investors bought a net 8.2 trillion won worth of the products, or 92.7%, while institutions, including liquidity providers, sold a net 8.6 trillion won, leaving most of the price fluctuation risk on retail investors.
Trading turnover was also unusually high. From May 27 to June 12, the average daily turnover rate reached 122.5%, with average daily trading volume of 8.6 trillion won. That far exceeded the turnover rate for Samsung Electronics and SK hynix common shares, which was below 1%, as well as domestic equity leverage and inverse ETFs, which stood at 30.2%, highlighting a trading pattern driven by short-term gains.
Losses were also steep. During the consecutive decline from May 27 to June 12, the Samsung Electronics leverage product fell as much as 35.9% (underlying asset: -18.0%, days 4 to 8), while the SK hynix leverage product dropped as much as 38.0% (underlying asset: -19.1%, days 2 to 8). The average maximum decline for the two products was 36.9%, about twice the drop in the underlying assets.
On the day when the SK hynix underlying asset posted its sharpest decline, the 5th, the spot stock fell only 9.92%, but the related leverage product dropped by about 20%. Given the daily price limit for domestic stocks of plus or minus 30%, a leverage product could theoretically lose as much as 60% in a single day.
The gap between market price and NAV is another risk factor. In particular, on the first trading day, as the SK hynix underlying asset surged, some market orders were executed at prices above net asset value (NAV). An FSS official said, "We plan to continue monitoring investment trends in single-stock leverage products and, if concerns over harm to financial consumers rise, take additional measures such as issuing further consumer alerts."

elikim@fnnews.com Kim Mi-hee Reporter