The Bank of Korea pointed to the Samjeon-Nyx leverage exchange-traded fund (ETF) as one of the reasons for the "roller-KOSPI" market, where the KOSPI index, which had broken above 9,200, sank to the 5,200 range in about a month.
The Bank of Korea (BOK) said in its currency and credit policy report on the 10th that "a surge in leverage ETF investment based on expectations for a trend rise in stock prices also acted as a factor amplifying stock price volatility." It said the listing in May of an ETF that tracks the ups and downs of Samsung Electronics and SK hynix at double the rate shook the KOSPI index.
According to the Bank of Korea (BOK), the size of the Samjeon-Nyx leverage ETF grew from $3.33 billion to $10.7 billion within a month of listing. During the same period, the United States had no such single-stock leverage ETFs. The United Kingdom's was $40 million, one-250th the size of Korea's.
The Bank of Korea (BOK) also cited the high market weight of semiconductor corporations as a reason for greater stock volatility. It said the index swung sharply because Samsung Electronics and SK hynix made up half of the total market capitalization of KOSPI-listed corporations. The higher the KOSPI index rose, the greater the contribution of the two stocks. The Bank of Korea (BOK) saw the contribution rate of Samsung Electronics and SK hynix as 50.8% when the KOSPI index rose from 5,000 to 6,000. But when it rose from 8,000 to 9,000, the contribution rate was analyzed at 99%.
The Bank of Korea (BOK) said, "In the United States and Japan, the stock prices of major memory semiconductor corporations also rose and fell sharply," adding, "the weight of those corporations was much lower than in Korea, so the impact on stock market volatility was limited." In addition, the Bank of Korea (BOK) cited as causes of heightened volatility: ▲mechanical portfolio rebalancing by foreigners following stock price gains ▲an expansion of overseas leverage investment in domestic stocks.
The Bank of Korea (BOK) said, "Financial products linked to domestic semiconductor corporations have expanded rapidly overseas," adding, "there is a growing possibility that they will affect the domestic financial market through unexpected channels, so it is necessary to strengthen monitoring systems."