The high-leverage trading of South Korean semiconductors has clearly retreated.

In June and July, the daily trading volume of the SK Hynix-related 2x leveraged ETFs peaked at close to 650 million to 800 million shares. After entering August, it has long remained below 100 million shares, shrinking by over 90%.

Recently, Bloomberg Industry Research compiled statistics on the single-stock leveraged ETFs related to Samsung Electronics and SK Hynix together. The weekly trading volume of this type of product once approached 55 billion USD and has dropped to a small fraction of the peak period after entering August.

A notable characteristic of this round of semiconductor trading in South Korea over the past few months has been that a large number of retail investors simultaneously used financing and 2x single-stock leveraged ETFs, causing the same principal amount to repeatedly cycle between chasing gains, stop-losses, liquidations, and re-entering the market. This 55 billion USD is the total trading volume, indicating that the trading frequency and leverage usage at that time had reached a very aggressive level.

The single-stock leveraged ETFs need to adjust their exposure back to the target multiple every day, and the market making and hedging sides will also adjust the positions of related stocks and derivatives accordingly, increasing buying when prices rise, and increasing selling when prices fall. Coupled with the margin requirements of financing accounts, the short-term volatility of Samsung Electronics and SK Hynix will continue to be amplified.

In June, forced liquidations due to insufficient margin in South Korea were close to 1 trillion won, and in July, they were also near 1 trillion won. By early August, the financing balance in the South Korean market still stood at 27.4 trillion won.

Two consecutive months of forced liquidations have cleared out some of the highest leverage positions, leaving a still significant scale of financing. However, the trading centered around repeatedly increasing leverage and frequently swapping around Samsung Electronics and SK Hynix has significantly decreased.

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