Leverage ETFs Shake KOSPI, But This Strategy Curbs Volatility

*Editor's Note: 'AI PRISM' (Personalized Report & Insight Summarizing Media) is an "AI-based personalized news recommendation and summarization service" developed with support from the Korea Press Foundation. It selects and provides six customized news items by reader type.

1. Blended ETFs: The 'Counter to Leverage'

- Key Summary: Since the listing of single-stock leverage ETFs, the KOSPI has recorded daily fluctuations of more than 5% on 29.2% of all trading days, an unusual level compared with the five-year average (2.1%). Leverage ETFs follow a "trend-following" structure, increasing positions when the underlying asset's price rises and reducing them when it falls, repeating buying in rising markets and selling in falling markets to reinforce existing trends. Meanwhile, the "Constant Mix" strategy, which holds 50% each in stocks and bonds while maintaining a constant ratio, is a counter-trend strategy that trades against the movement of the underlying asset's price, with an effect of lowering market volatility. It has been argued that if blended ETFs using such a fixed-ratio strategy expand, they could serve as an alternative that partially eases the market volatility amplified by leverage ETFs.

2. SK Fund Concentration…More Than Half of Major Groups' Trading Value

- Key Summary: According to the Korea Exchange, the trading value of SK Group's 19 listed affiliates totaled 20.7593 trillion won on Tuesday, accounting for 51.67% of all corporate groups' trading value, meaning SK Group alone traded more funds than all remaining corporate groups combined (48.33%). This is an unusual level of concentration, contrasting with SK Group's 35.39% share of total corporate group market capitalization, which is lower than Samsung Group's (39.94%). The inflow of single-stock leverage ETF funds into SK hynix is also deepening the concentration, with 4.5252 trillion won flowing into just two products, "KODEX SK hynix Single-Stock Leverage" and "TIGER SK hynix Single-Stock Leverage," over the past month. Meanwhile, SK hynix's American Depositary Receipt (ADR) listing in the United States, scheduled for the 10th, is cited as an additional variable, raising concerns that expanded access for overseas investors and expectations of a value reassessment in the global market could further intensify the concentration.

3. Takaichi 'Expansionary Fiscal' Shock…10-Year Yield Hits New High Again in 3 Days

- Key Summary: Japan's 10-year government bond yield surged to as high as 2.830% at one point during Friday's session, marking its highest level in about 30 years since October 1996, and surpassing the previous high (2.810%) recorded on the 3rd of this month in just three days. Analysts attribute this to a large-scale sell-off of government bonds and a spike in yields, driven by the so-called "Honebuto," the expansionary fiscal policy officially announced by Japan's Takaichi Sanae government, which contains a plan to increase fiscal spending by 10 trillion yen (about 9.451 trillion won) annually starting next year. The deletion of references to "fiscal consolidation" from the original draft is also cited as a factor that stoked market anxiety. In addition, the "Honebuto shock" has placed downward pressure on the yen's value, with the yen-dollar exchange rate rising above the 162-yen range during the session in the Tokyo foreign exchange market, again approaching the lowest level in 40 years since the Plaza Accord (December 1986) recorded at the end of last month.

4. hynix Listing ADR…Can It Achieve 'Micron-Level Value'?

- Key Summary: SK hynix is scheduled to list an American Depositary Receipt (ADR) on the Nasdaq on the 10th at a scale of $28.1 billion (43.14 trillion won), which is expected to be the largest ever for a foreign company listing in the United States, surpassing Alibaba ($25 billion) and Aramco ($25.6 billion). Through the ADR listing, it will secure eligibility for inclusion in major indices such as the Nasdaq 100, and mechanical buying demand from ETFs tracking these indices is also anticipated. Based on that day's closing price, SK hynix's 2026 forward price-earnings ratio (PER, share price divided by earnings per share) is 7.42 times, while Micron's is 9.44 times, leading to interpretations that SK hynix is undervalued compared with Micron, the world's third-largest memory maker. Meanwhile, given that the price gap between Taiwan's TSMC's main shares and its ADR frequently widens by more than 10%, cautious views also coexist that it is too early to be optimistic about spillover benefits for the Korean stock market.

5. Nvidia AI Server Rack Launch Disrupted…Asian Tech Stocks Plunge

- Key Summary: Semiconductor analysis firm SemiAnalysis stated in a report that the launch of Nvidia's next-generation AI rack, the "Kyber NVL144," has been delayed by more than 12 months to 2028 due to manufacturing issues. The main causes cited were that mass production of the multilayer printed circuit board (PCB), a core component of the system, is difficult with current technology, and that the optical connection work of the ultra-high-speed connection device (NVSwitch) linking graphics processing units (GPUs) has not been completed. As a result, Asian-related stocks such as Japan's Ibiden and Hong Kong's Kingboard Laminates Holdings, which have Nvidia as their largest customer, fell more than 10% during the session, spreading the shock across Asian tech stocks broadly. However, forecasts also emerged that more opportunities could flow to the Korean industry, which has strong PCB competitiveness, to make up for the shortfall in technology and volume.

6. LG Electronics, Doosan Robotics Shares 'Cut in Half'

- Key Summary: Shares of LG Electronics and Doosan Robotics, whose expectations peaked with the visit of Nvidia CEO Jensen Huang to Korea, plunged 52.7% and 50.5% from their highs within a month, leaving investors who bought at the peak prices at the time facing valuation losses of more than half. Naver and Hyundai Motor (005380.KS) also fell about 30% and 33% respectively, with analysts attributing the main cause to expectations of collaboration with Nvidia being priced into shares in the short term, followed by a flood of profit-taking sales. According to financial information provider FnGuide, the average securities firm target price (consensus) for LG Electronics is 176,750 won, below the current share price level, while Naver's average target price is 329,227 won, well above its current share price, maintaining a relatively positive view. Accordingly, the securities industry expects future share price movements to differentiate by stock depending on whether AI and robotics industry expectations translate into earnings.