Intraday volatility: SK Hynix shares rebounded after a 9% plunge
The listing of SK Hynix shares in New York has led to increased volatility around the clock, according to Bloomberg
Following the sell-off on Wall Street, SK Hynix shares experienced significant volatility in Korea on July 14: they rose 4.6% at the start of trading, then gave up those gains and fell as much as 9% at their low. But by mid-session, they began to recover again—at the time of publication, they were up about 3%. Meanwhile, shares of the chipmaker’s closest competitor—Samsung Electronics—remained virtually unchanged in the first half of the day but rose 4% in the afternoon.
The day before, SK Hynix shares plummeted by a record 15% in Seoul . The company’s American Depositary Receipts (ADRs) (linked to the underlying shares at a ratio of 10 to 1) then fell another 9.3% on Wall Street, erasing much of the gains made since their U.S. debut on July 10.
Nonstop Swinging
Sharp fluctuations in SK Hynix’s stock began long before the ADR offering. According to Bloomberg, the stock price fluctuated by at least 5% in either direction during more than 50 trading sessions this year. Now, following the U.S. listing, price swings in Seoul and New York could reinforce each other around the clock, the agency notes.
“We need to distinguish between volatility and cycles,” wrote Lee Chonuk, an analyst at Samsung Securities. “In the past, heightened volatility could be interpreted as a signal of a cycle shift. Today, however, it should be viewed as a permanent phenomenon driven by structural changes in the stock market.”
The number of automatic trading halts due to sharp price swings on the Korean stock exchange has reached record levels. This is partly due to the popularity in Korea of leveraged exchange-traded funds (ETFs) linked to local chipmakers and the rebalancing that such ETFs must undergo. Analysts have repeatedly warned that SK Hynix’s U.S. debut, combined with the launch of these funds, could spread volatility to the global level, Bloomberg notes.
“Korea has become a barometer for artificial intelligence,” noted Shim Jeong-min, an analyst at CLSA Securities Korea. “In the past, traders looked to the Philadelphia Semiconductor Index or the Nasdaq to predict what would happen in the Korean markets. Now it’s the other way around. Korea is exerting an increasing influence,” he added.
The Force That Moves the Market
More than a dozen leveraged ETFs linked to Samsung Electronics and SK Hynix shares have lost nearly half their value since their launch in late May. The largest of these—SAMSUNG KODEX SK Hynix Single Stock Leverage, with $3.4 billion in assets—has lost about 45%, the agency reports.
Such products can amplify both gains and losses: to maintain their stated leverage, ETFs buy securities when prices rise and sell them when prices fall. “Leveraged ETFs can amplify short-term volatility without affecting fundamentals and increase the risk of excessive movements in both directions—and that’s where opportunities can arise,” said Cameron Chui, a strategist at JPMorgan Private Bank. He considers the current valuation of the Korean stock market “quite attractive compared to both emerging and developed markets.”
Why It's Especially Painful for Retail Investors
Leveraged ETFs tracking the stocks of South Korea’s largest chipmakers have become popular among retail investors seeking higher returns—and now they face the threat of significant losses. “The sharp decline in these ETFs has been particularly painful for retail investors, as many apparently viewed them as long-term investments rather than instruments for short-term trading,” said Jeong In-yoon, head of Fibonacci Asset Management.
This article was AI-translated and verified by a human editor
