▲ Financial Supervisory Service (FSS)
The Financial Supervisory Service (FSS) has issued a consumer alert, urging investors to exercise caution regarding leverage products tied to single stocks.
This move comes as signs of overheating have emerged, with individual investors flocking to these products amid increased stock market volatility, causing their total market capitalization to double in a short period.
The FSS issued the "caution" alert today (June 18), noting that the prices of single-stock leverage and inverse products are experiencing sharp fluctuations amid the heightened volatility in the stock market.
As of June 12, the total market capitalization of single-stock leverage products reached 9.6 trillion won, a 2.1-fold increase in just 12 trading days from the 4.5 trillion won recorded at the time of their listing on May 27.
During this period, individual investors made net purchases totaling 8.2 trillion won, concentrating the volatility risk among retail investors. In contrast, foreign investors were net sellers, with only 200 billion won in net sales.
A trend of seeking short-term profits was also prominent.
The average daily trading turnover rate stood at 122.5%, significantly higher than that of spot stocks (less than 1%) and domestic stock-type leverage/inverse exchange-traded funds (ETFs) (30.2%), with trading volume reaching 8.6 trillion won.
The gap between market prices and actual value is also widening.
There have been instances where trades were executed at prices significantly different from the Net Asset Value (NAV) immediately after the market opened or near the close. On the day of listing, a lack of sell orders for SK Hynix led to investors purchasing at inflated prices.
In particular, losses have widened significantly during market downturns.
During consecutive downward trends, the maximum loss from the peak averaged 36.9%.
By product, the maximum decline for Samsung Electronics leverage products was 35.9% (June 4–8), while for SK Hynix products, it was 38.0% (June 2–8).
This was approximately double the maximum decline of the underlying individual stocks, Samsung Electronics and SK Hynix, during the same period.
Another risk factor is that, due to the product structure, losses can reach up to 60%, which is double the domestic stock price limit of ±30%.
The FSS emphasized, "Unlike diversified ETFs, single-stock leverage products are directly exposed to the stock price fluctuations of individual companies."
The regulator also warned that immediately after the market opens and near the market close—when liquidity providers (LPs) are exempt from the obligation to submit quotes—market orders may be executed at prices higher or lower than expected.
Investors should check the discrepancy rate before buying, as it can widen if investors flock to the product at once or if there is a shortage of buy/sell orders.
For example, if the NAV per share is 10,000 won but it trades at 10,200 won in the market, and the market price later adjusts to the NAV level, the investor could suffer a loss equal to the discrepancy rate (+2%).
Furthermore, the FSS advised investors to check the spread between buy and sell quotes and to use limit orders rather than market orders.
Investors should also be aware that because these products are managed based on daily returns, repeated fluctuations can lead to a "negative compounding effect," resulting in returns lower than expected.
"We will continue to monitor the investment trends of single-stock leverage products," the FSS stated. "If the risk of financial consumer harm increases, we plan to issue additional consumer alerts."
※ Please note: This article was translated by AI and may contain errors.