With semiconductor shares rising at the start of the year and the KOSPI index hitting a record high day after day, a semiconductor "geared inverse" product (inverse leverage 2x) has also arrived to prepare for a correction. It is seen as a niche strategy by securities firms targeting hedging (risk diversification) demand from investors who feel price pressure amid the market's sharp rally.
According to the financial investment industry on the 19th, Hana Securities is undergoing a review by the Korea Exchange (KRX) to launch the "Hana Inverse 2X Semiconductor" exchange-traded note (ETN). If it passes the review, it plans to issue it on Feb. 12, with an initial issuance of 20 billion won.
There is currently an ETF in the ETN and exchange-traded fund (ETF) market that bets on a decline in U.S. semiconductor stocks, the "RISE U.S. Semiconductor Inverse (Synthetic H)" ETF, but this is the first inverse product that uses domestic semiconductor stocks as the underlying asset. Hana Securities launched the "Hana Semiconductor" and "Hana Leverage Semiconductor" ETNs in Mar. last year.
An ETN is a product that tracks the rate of rise or fall of a specific asset or asset index, and it differs from an asset management company's ETF in that a securities firm issues it based on its own credit. The ETN market is currently only one-tenth the size of the ETF market, but it has the advantage that the underlying index can be composed with as few as five components and it does not require direct holding of physical assets. For launching a wide variety of products, a securities firm's ETN is advantageous.
Recently, as expectations for the KOSPI to reach 5,000 points have grown, the number of individual investors betting on "contrarian" inverse products has surged. They are betting on a correction after a short-term spike. In fact, from the start of the year through the 16th, individuals made a net purchase of 321.1 billion won in the "KODEX 200 Futures Inverse 2X" ETF. The No. 1 stock sold by individuals last week (the 12th–16th) was Samsung Electronics at 919.6 billion won. However, as the index continues to rise, most investors are in loss territory. Since the start of the year, inverse products such as "RISE 200 Futures Inverse" (-11.6%) and "KODEX 200 Futures Inverse 2X" (-2.5%) have mostly fallen.
Semiconductor stocks are cited as the top driver of the KOSPI's sprint at the start of the year. Semiconductor names have risen on expectations that earnings will improve sharply thanks to AI-related memory price gains. According to Meritz Securities, semiconductor stocks account for 37.5% of the KOSPI's market capitalization and as much as 49.5% of its net profit. In effect, semiconductors are responsible for half of the KOSPI's earnings.
In the securities industry, while there is little doubt about the upward trend of the semiconductor cycle over the mid to long term, there is a growing wariness of excessive crowding in the short term due to "FOMO" (fear of missing out) psychology. As concerns grow that share prices have run ahead of the pace of earnings improvement, market caution is peaking.
Lee Kyung-min, a researcher at Daishin Securities, said, "While leading stocks such as semiconductors and defense, which have high KOSPI earnings contributions, have solid mid- to long-term earnings directionality, we recommend increasing weights on pullbacks during rotational moves rather than chasing rallies," adding, "With price pressure rising recently, the market's sensitivity to issues could increase."
Hana Securities is hurrying to launch a "semiconductor geared inverse ETN" targeting investor demand seeking risk management and hedging (risk diversification) tools for semiconductor stocks, in the same vein. A Hana Securities official said, "We prepared this product considering diverse investor demand," adding, "We have even secured a standard code from the exchange for the product's launch and are preparing for the review process."