Samsung Electronics and SK Hynix have rebounded in recent sessions, and the related single-stock leveraged ETFs have also recovered sharply. Even so, investors who bought near the June 25 high are still facing heavy losses, according to Korean media cited by BlockBeats on Aug. 16.
As of Aug. 14, Samsung Electronics was down 23.43% from its June 25 closing price, while SK Hynix had fallen 43.61% over the same period. Data showed that seven Samsung Electronics single-stock leveraged ETFs were down an average of 52.25% versus June 25, while seven SK Hynix leveraged ETFs posted an average loss of 76.51%.
An investment of 1 million won made at that point would now be worth about 478,000 won on average in the Samsung ETF group and about 235,000 won in the SK Hynix group. Based on current net asset values, those ETFs would need to rise about 109.4% and 325.7%, respectively, to return to break-even.
The report said these leveraged ETFs track twice the daily return of their underlying stocks. Because of that structure, the underlying shares do not simply need to rise by half the ETF recovery target. Repeated price swings also create volatility drag, which raises the hurdle for investors trying to recover principal.
Under an assumption that the underlying stocks rise by the same proportion each day for the next 20 trading days without any down days, Samsung Electronics would need to gain about 45.2% from current levels to reach 398,600 won. SK Hynix would need to rise about 109.1% to 3.439 million won. At those levels, the average losses in the related leveraged ETFs would be eliminated.
Samsung Electronics and SK Hynix are now trading at 12-month forward price-to-earnings ratios of 4.5x and 3.7x, respectively. Kim Dong-won, head of research at KB Securities, said memory demand is expected to strengthen over the coming years and that both companies could see their shares re-rated starting in the third quarter.