Average Daily Turnover Reaches 130%... Leverage Products Hit by Short-Term Trading [Stock Market Volatility at 'Danger Level']

The average daily turnover of single-stock leveraged exchange-traded funds (ETFs) has been found to be about three times higher than that of the overall ETF market. Some products are changing hands as many as 25 times a day, prompting concerns that ultra-short-term trading is driving volatility higher.
According to the Korea Exchange on the 19th, the average daily turnover rate for 16 single-stock leveraged and inverse 2x products tied to Samsung Electronics and SK hynix, launched on May 27 and tracked through the 16th of this month, stood at 126.9%. That means ownership changed roughly 1.3 times a day. The figure is also nearly three times the 42.7% average daily turnover rate for the overall ETF market during the same period. Turnover is calculated by dividing trading volume by the number of listed shares, and a higher figure indicates more frequent changes in ownership.
Single-stock leveraged and inverse 2x products drew strong investor attention soon after their listing, with turnover reaching 200%. Trading then gradually slowed, falling to 54.6% on the 15th of last month, but activity has surged again. In particular, ultra-short-term trading has concentrated in 'SOL SK hynix Futures Single Stock Inverse 2X.' Its average daily turnover rate reached 1,345.1%, meaning ownership changed more than 13 times a day. On the 16th, turnover even spiked to 2,521.2%.
Single-stock leveraged and inverse 2x ETFs track twice the rise or fall of a specific stock. In a leveraged product, returns are doubled when the underlying asset rises, but losses also double when it falls. An inverse 2x product, which moves in the opposite direction at twice the rate, works the other way around.
Because of this structure, leveraged and inverse 2x products are typically used for short-term investing. As stock market volatility has recently increased, short-term trading has become even more active. In particular, leveraged and inverse products can suffer principal erosion through the 'negative compounding effect' when prices swing sharply, making long-term holding more burdensome in volatile markets. Since the launch of the single-stock leveraged product on May 27, SK hynix shares have fallen only 10.2%, but the single-stock leveraged product tied to SK hynix has plunged 30% to 40%. Related inverse 2x products also fell by more than 40% over the same period.
Brokerage industry watchers say the rapid rise in leveraged short-term trading amid volatile markets is creating a vicious cycle that further amplifies volatility. A financial investment industry official said, "In a situation like the current one, where volatility is extreme, it appears that more investors are turning to short-term trading to lock in gains quickly or reduce losses." The official added, "This is worsening stock market volatility and undermining the soundness of the capital market."
Others, however, argue that leverage cannot be singled out as a major driver of rising volatility. Another official said, "Leverage may have some impact on volatility," but added, "Semiconductor stocks themselves are extremely volatile in global markets, so there are limits to interpreting this as a problem caused only by leverage."
jisseo@fnnews.com Seo Min-ji Reporter