Investors who bought Samsung and SK Hynix leveraged ETFs at their highs are still incurring heavy losses; some of these products would need to rise by more than 300% to break even.

According to South Korean media reports, Samsung Electronics and SK Hynix have recently rebounded, with their respective single-stock leveraged ETFs also surging sharply. However, investors who purchased near the June 25 high still face significant losses. As of August 14, Samsung Electronics was down 23.43% from its June 25 closing price, while SK Hynix fell 43.61% over the same period. Data shows that the seven Samsung Electronics single-stock leveraged ETFs have posted an average loss of 52.25% since June 25, and the seven SK Hynix leveraged ETFs have averaged a 76.51% loss. If investors had invested 1 million won each on that date, their holdings are now worth roughly 478,000 won and 235,000 won respectively. Based on current net asset values, the two types of ETFs would need to rise by approximately 109.4% and 325.7% respectively to break even. Since these leveraged ETFs track twice the daily return of their underlying assets, the required underlying asset gain to recover principal cannot be simply calculated as twice the ETF’s required increase, and repeated price fluctuations will also lead to volatility drag. Assuming the underlying assets rise by the same percentage every trading day for the next 20 sessions with no declines, Samsung Electronics would need to climb around 45.2% from current levels to 398,600 won, and SK Hynix would need to rise roughly 109.1% to 3,439,000 won, to erase the average losses of the related leveraged ETFs. Currently, the 12-month forward price-to-earnings (P/E) ratios of Samsung Electronics and SK Hynix have fallen to 4.5x and 3.7x respectively. Kim Dong-won, head of research at KB Securities, stated that storage demand is expected to strengthen further in the coming years, and he projects both companies could see a revaluation of their stock prices starting from the third quarter.