A leveraged exchange-traded fund (ETF) based on Samsung Electronics and SK hynix is set to list for the first time on the 22nd of next month. On the 30th, Shinhan Investment & Securities analyzed the listing effects of single-stock leveraged ETFs based on U.S. cases and said that when blue chips list as leveraged ETFs, their lottery-like characteristics strengthen.
According to Shinhan Investment & Securities, eight asset management companies are preparing to list single-stock ETFs, and with a limit of two products per firm, a total of 16 products are expected to list.
Park U-yeol, an analyst at Shinhan Investment & Securities, said, "Large firms are each preparing two leveraged ETFs on Samsung Electronics and SK hynix, and some small and mid-sized firms plan to list leveraged and inverse-multipler ETFs on the same asset at the same time," adding, "If ETFs with the same structure see duplicate listings, demand may concentrate in large-firm ETFs, and competition, including cuts to management fees, is expected to intensify."
In the meantime, leveraged ETFs on Samsung Electronics and SK hynix have already been listed and traded on overseas exchanges such as Hong Kong, and it was expected that this would stem the outflow of leveraged investment demand overseas.
However, when analyzing the listing effects of single-stock leveraged ETFs in light of U.S. cases, an analysis found that for large blue chips, both the skewness and kurtosis of stock return distributions increased with the listing of leveraged ETFs.
Park said, "For theme stocks, the period up to just before leveraged ETF listing was an overheated phase, so afterward both the skewness and kurtosis of stock return distributions decreased," adding, "For large blue chips, both skewness and kurtosis increased with leveraged ETF listings."
Park explained that this means the stock return distribution becomes a "right-skewed distribution with fat tails."
Park analyzed, "As blue chips list as leveraged ETFs, extreme values occur more frequently, strengthening their lottery-like nature," adding, "The odds of winning are not high, but sudden surges on some days become more frequent."