Two leveraged ETFs tracking SK Hynix lost 18.1% and 18.6% on Tuesday as the selloff in semiconductor stocks continued. Funds targeting South Korean equities and US memory makers fell alongside them, while major US benchmarks finished mostly higher.
Two leveraged ETFs built on SK Hynix’s American depositary receipts were pummeled on Tuesday. The GraniteShares 2x Long SK Hynix Daily ETF, which seeks two times the daily performance of those ADRs, plunged 18.1% for a weekly loss of 30.2%, according to FactSet data. The ProShares Ultra SK Hynix ETF, which tracks the same ADRs on the same terms, slid 18.6% for a weekly slump of almost 29%, also according to FactSet.
Why the memory trade turned
Memory makers SK Hynix and Samsung Electronics dominate South Korea’s equity market, and their shares skyrocketed earlier in the year on surging demand for products used in the buildout of AI infrastructure. But SK Hynix listed its shares in the US only this month, and whiplash around the powerful artificial-intelligence trade continues.
Speculating on price swings is risky, even as the pool of funds offering amplified bets on daily returns of single stocks and equity indexes has swelled over the past couple of years. When volatility jumps, losses can get ugly — and extreme swings also risk a relatively rare unplanned delisting, because competition for assets can leave some funds struggling to gain traction.
Korea funds and US memory stocks follow
The iShares MSCI South Korea ETF dropped slightly more than 6% on Tuesday. Traders who had used the Direxion Daily MSCI South Korea Bull 3X ETF for bullish bets saw a steep drop of 17.8%, according to FactSet data.
Memory stocks were under selling pressure in the US as well, with shares of Micron Technology and Sandisk slumping. Among funds designed to magnify bullish bets on Sandisk, the Tradr 2X Long SNDK Daily ETF plummeted 28.5% on Tuesday, according to FactSet data.
Indices hold up as chip stocks sink
Major US benchmarks finished mostly higher on Tuesday despite selling in the S&P 500’s tech sector. The S&P 500 rose 0.2% while the Nasdaq Composite Index fell 0.2% and the Dow Jones Industrial Average rallied 1%.
Selling in chip stocks was pronounced. The iShares Semiconductor ETF posted a big drop of 4.8% on Tuesday, bringing its July losses to 23.3%, according to FactSet data.
Source: MarketWatch
Trading involves risk.
Risk Disclaimer
