[DigitalToday reporter Sang-yeop Oh] Eighteen single-stock leveraged and inverse products based on Samsung Electronics and SK Hynix will be listed on the main bourse.

The Korea Exchange said on Thursday it plans to newly list 18 single-stock leveraged and inverse products on the main bourse on May 27. The products comprise 16 exchange-traded funds (ETFs) and 2 exchange-traded notes (ETNs).

The products to be listed are based on share prices or stock futures returns of Samsung Electronics and SK Hynix. The ETFs include 8 products based on Samsung Electronics and 8 based on SK Hynix. The ETNs are 1 Samsung Electronics single-stock leveraged ETN and 1 SK Hynix single-stock leveraged ETN issued by Mirae Asset Securities.

The total planned listing size is 43.2 trillion won. The planned total for ETF trust principal amounts is 41.2 trillion won, and the total ETN issuance principal amount is 200.0 billion won.

Among the ETFs, 5 spot leveraged products for Samsung Electronics and 5 for SK Hynix will each be listed. Samsung Electronics spot leveraged ETFs will be offered by Samsung Asset Management, Mirae Asset Global Investments, Korea Investment Management, KB Asset Management and Hanwha Asset Management. SK Hynix spot leveraged ETFs will be offered by Samsung Asset Management, Mirae Asset Global Investments, Korea Investment Management, KB Asset Management and Shinhan Asset Management.

Leveraged ETFs using stock futures will also be listed. Samsung Electronics futures leveraged ETFs will be offered by Kiwoom Asset Management and Hana Asset Management, and SK Hynix futures leveraged ETFs will also be offered by Kiwoom Asset Management and Hana Asset Management.

There will be 1 futures inverse 2X ETF each for Samsung Electronics and SK Hynix. Hanwha Asset Management will list the Samsung Electronics futures inverse 2X ETF, and Shinhan Asset Management will list the SK Hynix futures inverse 2X ETF.

The Korea Exchange explained that the listing follows revisions to relevant rules, including the enforcement decree of the Capital Markets Act, aimed at addressing asymmetric regulation between domestically and overseas-listed ETFs. It said the aim is to raise incentives to invest in domestic capital markets through listings of single-stock-based ETFs and ETNs.

The product structures differ. Samsung Electronics and SK Hynix leveraged ETFs include shares and stock futures and track twice the daily return of the underlying stock. The allocation between spot and futures differs by product. The ETNs provide investors with twice the daily return of Samsung Electronics and SK Hynix and have a structure that reinvests dividends and other payouts.

Futures leveraged products mainly include stock futures and track twice the daily return of Samsung Electronics futures or SK Hynix futures. Futures inverse 2X products use stock futures to track negative twice the daily return of the relevant stock futures.

Investment risks are higher than for general ETFs and ETNs. The Korea Exchange stressed that single-stock leveraged and inverse products track a multiple of the underlying asset's daily return, not cumulative returns over the full investment period. As the underlying asset is an individual stock, volatility could be greater than in index-based or theme-based leveraged and inverse products.

In the process of repeated stock price swings, a negative compounding effect can also occur in which principal in leveraged and inverse products shrinks even if the underlying share price is unchanged. As a result, they may not be suitable for long-term investment.

Investors should also note that an imbalance between supply and demand can create a discrepancy between net asset value (NAV) or indicative value and the market price. As ETNs are unsecured, uncollateralised derivative-linked securities with issuer credit risk, investors also need to check the issuer's financial soundness.

To help investors make decisions, the Korea Exchange plans to provide information including underlying index data, details of assets delivered for ETFs, and real-time indicative value for ETNs through the websites of the exchange, asset managers and securities firms.