Trading in Korea's stock market is increasingly concentrated in Samsung Electronics and SK hynix. The two stocks alone accounted for more than half of all transactions in the domestic market by value, and when including single-stock leveraged and inverse exchange-traded funds (ETFs), their share topped 80%. In the securities industry, concerns are growing that the semiconductor-centered flow of funds, coupled with single-stock leveraged products, is further amplifying market volatility.
According to the Korea Exchange (KRX) on the 9th, on the 8th the transaction value of Samsung Electronics and SK hynix was 9.5563 trillion won and 15.2560 trillion won, respectively. The two stocks totaled 24.8123 trillion won, accounting for 51.0% of the entire KOSPI and KOSDAQ transaction value of 48.6090 trillion won.
This is a sharp increase of 21 percentage points from 30.0% on May 26, just before single-stock leveraged and inverse ETFs were listed.
Adding the 16 single-stock leveraged and inverse ETFs that use Samsung Electronics and SK hynix as underlying assets, which had a transaction value of 15.6045 trillion won, brings the total to nearly 40 trillion won. By simple addition, trading related to Samsung Electronics and SK hynix accounted for 83.1% of transactions in the domestic stock market by value.
Because ETF transactions are not included in KOSPI and KOSDAQ transaction values, simple comparisons have limits. Even so, it is clear that market funds are quickly concentrating in semiconductors and related derivatives.
In fact, the domestic market has lately been swinging widely in line with the share-price moves of Samsung Electronics and SK hynix. When the two stocks tumbled around 6% on the 7th and 8th, the KOSPI also fell 4.91% and 5.35%, respectively.
The tilt toward semiconductors is becoming even more pronounced in stock-lending balances, which are viewed as a leading indicator of short selling.
On May 26, Samsung Electronics and SK hynix made up 32.1% of total stock-lending balances, but by the 8th that had expanded to 38.9%. In particular, SK hynix's lending balance jumped by more than 5 trillion won, and its share of total lending transactions grew from 16.2% to 21.5%.
The securities industry says single-stock leveraged ETFs have structural characteristics that amplify market volatility.
Yoo Myung-gan, a researcher at Mirae Asset Securities, said, "The recent sharp market correction stems more from technical factors in the short gamma structure of leveraged ETFs than from fundamentals," and added, "Because leveraged ETFs are structured to buy when prices rise and sell when they fall, this is a phase that requires constant monitoring."
Kim Seok-hwan, a researcher at Mirae Asset Securities, also said, "Leveraged ETFs rebalance every day just before the close to match the underlying index's daily return," and explained, "In this process, artificial short gamma exposure occurs, reinforcing forced buying and selling flows in response to price moves."
There is also analysis that market volatility has expanded significantly since the listing of single-stock leveraged ETFs.
Lee Jae-won, a researcher at Yuanta Securities Korea, said, "In less than a month and a half since the launch of single-stock leveraged ETFs, sidecars were triggered 16 times out of 49 and circuit breakers 5 times out of 8," and added, "As volatility rises, institutional investors find it harder to deploy new funds due to risk limits and liquidity constraints."
He added, "In a market where sidecars and circuit breakers keep repeating as they do now, it is difficult to expect large-scale institutional inflows on fundamentals alone," and said, "Institutional safeguards to reduce market volatility are also necessary."