A series of leveraged exchange-traded funds (ETFs) tied to the share price of Japanese NAND flash maker Kioxia Holdings are pushing to list on the New York stock market, Bloomberg reported on the 26th.
According to the report, at least nine ETFs designed to track twice the daily return of Kioxia's Japanese common shares or American depositary receipts (ADRs), or to inversely track them at double the rate, have filed applications for regulatory approval. One of them, US asset manager Tuttle Capital, plans to launch a single-stock leveraged ETF on Kioxia as early as next month once it receives regulatory approval, Bloomberg said.
Last month, Kioxia announced plans to list ADRs on the New York stock market, targeting as early as next spring. This means that even before the ADR listing, the US asset management industry has already begun designing product structures by assessing accessibility to Kioxia's Japanese common shares and hedging possibilities. Bloomberg explained that "Japanese securities regulators prohibit the launch of single-stock leveraged ETFs on the grounds that they lack diversification."
However, concerns have been raised that Kioxia leveraged ETFs could significantly increase volatility in the New York stock market. It means that the situation in Korea's KOSPI market, which repeatedly experiences sharp rises and falls driven by volatility from single-stock leveraged ETFs on Samsung Electronics and SK hynix, could be repeated in the New York market. Kioxia's common share price has also recorded extreme volatility, with fluctuation rates exceeding 50% at most depending on semiconductor outlooks. Andrew Jackson, head of Japanese equity strategy at Ortus Advisors, pointed out that "leveraged ETFs distort market mechanisms and enormously increase volatility, as can be seen in the Korean stock market."
