The U.S. has ADRs, Korea has leveraged products: the 'double tail' around SK hynix is shaking the market [Why stocks move]

[Financial News] The trading landscape around SK hynix is becoming increasingly complex. In South Korea, trading in single-stock leveraged exchange-traded funds (ETFs) is surging, and their impact on supply and demand is drawing debate. In the United States, a 2x leveraged ETF based on the American Depositary Receipt (ADR) listed on Nasdaq has also appeared.
That means Seoul now has a structure in which the common stock and a 2x ETF tracking it trade side by side, while New York has the ADR and an ADR leveraged ETF trading together. Given SK hynix's weight in the KOSPI, short-term trading and hedging demand in both countries could amplify swings in the broader Korean stock market, not just in the individual stock.■ Up 27%, then down 9%... the common stock weakens againAccording to the Korea Exchange and Nasdaq on the 16th, SK hynix ADRs closed at $176.46 on the U.S. stock market on the 15th, down 9% from the previous session. Just one day after soaring more than 27% the previous day, it gave back part of those gains.
Intraday swings were even larger. The ADR opened at $182 and rose to as high as $187.64 early in the session, but later fell to $166.50. The gap between the day's high and low exceeded 12%.
The same pattern carried over to the domestic market. SK hynix, which had rebounded 8.83% the previous day to close at 2.082 million won, fell more than 10% intraday on the day and slipped back to the 1.8 million won range. The KOSPI also dropped more than 7% intraday, triggering a sell-side circuit breaker that temporarily halted the effectiveness of program sell orders.
Another factor adding to market confusion is that the ADR and the common stock have shown sharply different price swings since the listing began. SK hynix ADRs once traded at more than a 50% premium to the Seoul-listed shares, and a sizable premium was still in place on the 15th. Analysts say the gap was widened by limited ADR supply, strong U.S. investor demand for semiconductors, and constraints on arbitrage between the two markets.
A securities industry official said, "In the past, the domestic common stock set the price and the ADR followed. Now, the U.S. and Korean supply-demand dynamics influence each other with a time lag," adding, "As leveraged products are also being traded in both markets, even small changes in supply and demand could be amplified more than before."■ A '2x bet' has also emerged in the U.S.In the U.S. market, a leveraged ETF that tracks twice the daily return of SK hynix ADRs has also been launched.
On the 15th, U.S. asset manager Direxion introduced the 'Direxion Daily SK hynix Bull 2X ETF (SKHL),' which seeks to deliver 200% of the daily return of SK hynix ADRs. At least 10 asset managers, including Direxion and ProShares, have also filed for listings of single-stock ETFs tied to SK hynix.
That gives U.S. investors a way to place amplified bets on SK hynix's share price gains with relatively little capital, rather than simply trading the ADR directly.
An industry official said, "The net assets of U.S. products are still small, so their direct impact on ADR prices may be limited," but added, "If money flows quickly into leveraged products when ADR float is not sufficient, hedging demand could increase price volatility."■ Korea is already struggling with leverageIn South Korea, 16 single-stock leveraged and inverse ETFs based on Samsung Electronics and SK hynix were listed simultaneously on May 27. Right after their launch, retail money poured in, and the related ETFs swept the top ranks in domestic stock market trading value.
On the 14th, the trading value of the 16 Samsung Electronics and SK hynix single-stock leveraged and inverse 2x ETFs reached 18.2827 trillion won, accounting for about 40% of the total KOSPI Composite Index trading value.
The surge in trading value is being driven by ultra-short-term trading. On that day, the turnover rate of 'SOL SK hynix Futures Single Stock Inverse 2X' reached about 2,400%. In other words, the listed shares changed hands more than 24 times on average in a single day. The turnover rate of 'PLUS Samsung Electronics Futures Single-Stock Inverse 2X ETF' also exceeded 1,100%, and half of the top 10 names by turnover were Samsung Electronics and SK hynix single-stock leveraged and inverse ETFs.
A financial investment industry official said, "The market can no longer be viewed separately in the U.S. and Korea," adding, "The key question is how strongly prices and fund flows formed in New York will carry over to Seoul, and then from Seoul back to New York."


[email protected] Choi Du-seon Reporter