Fueled by explosive demand for AI memory, the CSOP Hynix 2x Leveraged ETF has experienced a historic rally in 2026. As of June 22, the product posted a year-to-date gain of 1,061.92%, while its asset size skyrocketed 21.7 times from HK$636 million to HK$14.418 billion. Despite the stellar performance, analysis of fund flows reveals a highly retail-dominated trading landscape, with institutional investors largely absent.
The underlying stock, SK Hynix, has been on an upward trajectory, briefly surpassing Samsung Electronics in market capitalization on June 22 to become the most valuable stock on the Korean exchange. The company recently announced the delivery of 12-layer HBM4E samples, a next-generation high-performance DRAM for AI applications, boasting a pin speed of 16 Gbps and over 20% improvement in energy efficiency. Zhou Jingxiang, fund manager at Noah Research, noted that the current memory upcycle is primarily driven by AI inference computing power fueling SSD storage demand, and expects the industry boom to last throughout the year.
Retail Investors Dominate; Institutions Stay Cautious
Listed on the Hong Kong Stock Exchange on October 16, 2025, the ETF started with a mere HK$24 million in assets. The subsequent memory boom propelled its size explosively. Similarly, the CSOP Samsung 2x Leveraged ETF saw heavy inflows, reaching US$4.4 billion by June 18. However, a veteran foreign fund manager told reporters that most institutions avoid leveraged ETFs. Pension funds and other long-term allocators, seeking stable returns, are fundamentally mismatched with the high volatility of these products, leaving retail investors as the core buyers.
Leverage Risks Exposed: Drawdowns, Liquidity Anomalies, and Decay
Data from the Financial Supervisory Service of Korea show that between May 27 and June 12, SK Hynix's maximum drawdown was 19.1%, while its 2x leveraged ETF suffered a 38% decline. Individual stocks in Korea have a ±30% daily price limit, meaning a 2x leveraged product can theoretically lose up to 60% in a single day. In early June, a different 2x leveraged ETF tracking SK Hynix experienced two consecutive days of divergence from the underlying stock: on June 8, while the stock fell nearly 8%, the ETF surged almost 50%; the next day, the stock rose over 13% while the ETF plunged 40% intraday. The product manager, Korea Investment Management, attributed the anomaly to a lack of market-making liquidity during the closing auction, where market orders pushed the fund price into a large premium. When liquidity returned, the price corrected sharply, causing heavy losses for investors who had bought at the peak.
A Shanghai-based fund analyst further elaborated on the multiple risks of leveraged ETFs: volatility decay in high-volatility environments can lead to permanent losses even if the underlying returns to its previous high; the semiconductor sector is currently at historically high valuations, and a collective correction would amplify losses far beyond the underlying stocks; if fund size becomes large and triggers redemptions, a liquidity spiral may occur. On the fundamental side, Sheng Jin, portfolio director at Value Partners, pointed out that the semiconductor supply chain is long and globally interconnected. Any single variable — such as disappointing quarterly earnings or policy changes — could break existing valuation logic and trigger severe sector volatility, which leveraged products would magnify.
Industry insiders caution that with increasing divergence of views on semiconductor stocks and multiple uncertainties around geopolitics and valuation, individual investors should approach leveraged ETFs with extreme prudence.