Leveraged ETFs Lose 60% of AUM in Two Months; Negative Compounding Effect Crushes Leveraged Traders

Hong Kong stock storage concept stocks were hit across the board. Southern Two Times Long Hynix ETF (07709) closed down 30.24% at HK$38.02. With an asset size of $13.07 billion at the end of June, it shrank to $5.752 billion by July 27, evaporating 56%. Southern Two Times Long Samsung Electronics ETF (07747) fell 26.73%, with its scale shrinking from $3.738 billion to $1.23 billion, a decline of nearly 70%. Goldman Sachs pointed out that the core driver behind the crash in Korean stocks was the concentrated deleveraging of leveraged ETFs. The two weighted stocks accounted for 60% of the index, and with highly concentrated leverage funds, they are extremely susceptible to amplification under external shocks.