SK Hynix's listing in the US has set off a flurry on Wall Street: a large number of single-stock leveraged products will be launched next week, potentially bringing "Korean-style volatility" to the global markets.

Notice that SK Hynix's record-breaking debut in the US is paving the way for a new round of leveraged products tied to this South Korean storage giant's stock, bringing the previously popular bet on amplifying the stock's volatility in Seoul to Wall Street. According to data from issuers' websites, ProShares, Leverage Shares, and Rex Shares among others are preparing to launch products that allow investors to go long SK Hynix's American Depositary Receipts (ADR) at twice the leverage, with some issuers also preparing reverse bets for traders who are bearish on the stock. At least six such products are set to be launched next week. Leveraged ETPs tied to SK Hynix are among the most popular products in the industry, having a significant impact on the stock's trading in Seoul. One product issued by Southern Capital Funds Management Ltd. in Hong Kong has become the largest in the world among similar products, with assets surpassing $16 billion before a recent price drop. In South Korea, where SK Hynix, Samsung Electronics, and their tracking leveraged products account for over 70% of trading volume in the $4.3 trillion market, this has led to frequent and intense fluctuations in the Kospi composite stock index. SK Hynix's US listing boosts chip stocks John Cho, portfolio manager for Korean stocks at Morgan Asset Management, said, "Some elements of retail activity seem to be increasingly momentum-driven, with growth in single-stock ETFs boosting both trading volume and volatility of large-cap stocks. The emergence of leveraged ETFs is not seen as a healthy signal, as it may suggest retail behavior characteristics towards the end of the cycle." Analysts say that concentrated investments in single-stock leveraged products are starting to affect the stocks they aim to track. A wave of new leveraged ETPs listed in the US means that daily rebalancing flows will become larger, potentially exacerbating already high volatility. Industry research suggests that the scale of these leveraged products also makes it difficult for them to fulfill their promise to provide twice the daily return, leading to tracking errors. ETF analyst Rebecca Sin said, "US investors may encounter tracking difficulties similar to those with leveraged products tracking SK Hynix in Hong Kong. When demand significantly exceeds available inventory, ETP issuers may face difficulties in sourcing stocks and maintaining effective hedging, which may lead to tracking errors between the ETP and the underlying stock." Samsung, SK Hynix, and ETFs dominate Korean trading This anomaly has raised criticism of regulators allowing such high-risk instruments, with even an opposition party member calling for them to be delisted. For issuers, the opportunity is clear given investors' strong appetite for leveraged products. With the dust settling on a massive $26.5 billion US listing - the largest ever for a foreign company - a whole new potential investor base has been opened up. Francis Oh, Head of Business Development for Rex Asia, said, "I believe this product will capture the long-suppressed demand from global investors to directly invest in SK Hynix - something that could not be fully provided by being listed only in Korea."