Driven by fervent market interest in memory chips, the Hang Seng 2x Long Hynix ETF, listed in Hong Kong, has surged over tenfold year-to-date as of June 22, with its asset size exploding more than 20 times compared to the end of last year. The ETF tracks South Korea’s SK Hynix and has become one of the best-performing leveraged ETFs in 2026, fueled by AI memory demand.
SK Hynix’s stock price has continued to climb. On June 22, its intraday market cap briefly surpassed that of Samsung Electronics to become the largest in the Korean stock market, closing up 5.61%. Earlier, SK Hynix announced it had delivered samples of its 12-layer HBM4E to key customers. The HBM4E is a next-generation high-performance DRAM for AI, with a peak pin speed of 16 Gbps and a 20% improvement in energy efficiency. Industry insiders believe the HBM4E achieves dual upgrades in performance and energy efficiency, reduces transmission latency, operates stably under high bandwidth, and effectively enhances data processing capabilities for AI training and inference.
Explosive Growth in Leveraged ETF Assets, Retail Dominance
The Hang Seng 2x Long Hynix ETF was listed on the Hong Kong Stock Exchange on October 16, 2025, with an initial size of only about HK$24 million. As of June 18, the ETF's size had reached US$14.418 billion, a 21.7-fold increase from US$636 million at end-2025. Meanwhile, the Hang Seng 2x Long Samsung Electronics ETF reached US$4.4 billion as of June 18, after surging 215.96% in May and adding more than 50% in June.
However, a breakdown of capital structure reveals that leveraged ETF trading is highly retail-driven, with institutional participation largely absent. A seasoned foreign fund manager told local media that most institutions do not allocate to leveraged ETFs, with only a few hedge funds using them for short-term swing trading. Pension funds and other long-term allocators seek stable returns and are completely mismatched with the high-volatility, high-risk profile of leveraged products, making individual investors the core buyer group.
Volatility Risks: Extreme Cases and Multiple Hidden Dangers
Industry practitioners point out that leveraged ETFs are a classic double-edged sword, amplifying gains in uptrends and losses in downtrends. With the global semiconductor sector facing increasing divergence between bulls and bears, and uncertainties around geopolitics, industry fundamentals, and valuations, risks are continuously being exposed.
Recent market turbulence has vividly demonstrated the destructive power of leveraged products. A June 18 monitoring report from South Korea’s Financial Supervisory Service showed that between May 27 and June 12, Samsung Electronics’ underlying stock had a maximum drawdown of 18.0%, while its 2x leveraged ETF suffered a maximum drawdown of 35.9%. SK Hynix’s underlying stock fell 19.1%, with its 2x leveraged ETF drawdown expanding to 38%. Regulators have repeatedly warned that with a ±30% daily price limit on individual stocks in the Korean market, a 2x leveraged product can theoretically lose up to 60% in a single day, easily wiping out principal in extreme scenarios.
Beyond normal volatility amplification, leveraged ETFs have even experienced extreme divergences from their underlying stocks. In early June, a 2x leveraged ETF tracking SK Hynix posted two consecutive days of anomalous price action: on June 8, while SK Hynix shares fell nearly 8%, the ETF surged almost 50%; the next day, the underlying stock jumped over 13% but the ETF plunged 40% intraday. KIMC, the product’s manager, attributed the anomaly to a lack of market-making liquidity. During the closing auction, market makers have no obligation to quote, and a large number of market orders pushed the fund price up to a premium. When liquidity returned the next day, the price reverted to fair value, causing heavy losses for investors who bought near the peak.
A Shanghai-based fund analyst systematically outlined multiple potential risks of leveraged ETFs: First, their derivative structure with daily leverage resetting incurs decay in high-volatility environments, meaning even if the underlying stock returns to its previous high, the ETF’s net value may still suffer permanent losses. Second, leverage amplifies both gains and losses; with the semiconductor sector’s valuation at historically high levels, a collective correction would hit leveraged products far harder than the underlying stocks. If the product size continues to swell and then faces a wave of redemptions, a liquidity spiral could be triggered, exacerbating price declines. Third, in the Korean market, the trading volume of leveraged products is approaching that of the chip giants themselves; a massive concentration of retail investors betting on a single direction creates a positive feedback loop — fueling buys in upswings and accelerating sell-offs when stops are triggered — thereby increasing market fragility.
Uncertainty at the industry-chain level also amplifies the volatility risk of leveraged products. Sheng Jin, a portfolio director at Value Partners, noted that the semiconductor supply chain is long and deeply tied to global division of labor, with complex variables affecting valuations. Any single factor, such as a quarterly earnings miss or a shift in global industrial policy, can quickly break the existing valuation logic and trigger sharp volatility, and high-leverage products will amplify the impact in tandem.
Industry Outlook and Cautionary Note
Zhou Jingxiang, manager of the Noah Research Preferred Fund, said the current memory upcycle is driven by the explosion in SSD storage demand from AI inference computing, and the industry’s prosperity may remain upward for the full year. However, industry insiders stress that with semiconductor valuations at historical highs and growing bear-bull divergence, the risk of amplified losses from leveraged products is accelerating. Individual investors should exercise extreme caution when dealing with such instruments.