On Nov. 3, when the Kospi recovered the 8,000 mark, the closing figures for the Kospi, SK hynix and Samsung Electronics are displayed on a board at the dealing room of Hana Bank in Jung-gu, Seoul. The Kospi closed at 8,088.34, up 440.25 points (5.76%) from the previous session, while the Kosdaq index also ended at 868.41, up 1.69 points (0.19%). Yonhap News
Disclosures of excessive price disparity in exchange-traded funds (ETFs) hit a record high last month. The surge is attributed to increased volatility in large-cap semiconductor stocks following the listing of single-stock leverage ETFs tracking Samsung Electronics (005930.KS) and SK hynix (000660.KS) at the end of May.
According to the Korea Exchange (KRX) on Saturday, disclosures of excessive ETF price disparity totaled 1,299 last month. This marks an all-time high, up 88.8% from the previous monthly record of 688 in March. Including exchange-traded notes (ETNs), total disparity disclosures reached 1,859. So far this month, 131 excessive ETF disparity disclosures were made between the 1st and 3rd alone.
Disparity is an indicator representing the difference between an ETF’s market price and its net asset value (iNAV). When disparity widens, investors are more likely to buy an ETF above its actual value or, conversely, sell it below value.
The market views the increase in disparity disclosures as influenced by the expanded volatility of large-cap semiconductor stocks following the listing of single-stock leverage ETFs based on Samsung Electronics and SK hynix on May 27. Indeed, the 24th, which saw the most disparity disclosures last month at 179, came just after the KOSPI plunged 9.99% on the 23rd, with Samsung Electronics (-12.3%) and SK hynix (-3.84%) also falling sharply. The 16th, which had the second-most disclosures at 109, also saw significantly expanded market volatility as the KOSPI (5.2%), Samsung Electronics (4.5%), and SK hynix (5.3%) all surged the previous trading day. The 27th, which had the third-most disclosures at 94, similarly saw the KOSPI (-5.81%) and large-cap semiconductor stocks weaken together the previous trading day.
When classified by product name, disparity disclosures were concentrated in highly volatile product categories. Disclosures related to leverage ETFs were the most numerous at 224, followed by AI-related ETFs at 207, active ETFs at 188, semiconductor ETFs at 164, inverse ETFs at 114, and covered call ETFs at 72. In particular, among single-stock leverage ETFs, Samsung Electronics-related products saw 31 disparity disclosures and SK hynix-related products saw 34, repeatedly appearing in disclosures during the month following their listing.
Experts advised that investor caution is needed, as it is difficult to completely prevent disparity given the different methods for calculating an ETF’s market price and its real-time net asset value. A strengthened role for liquidity providers (LPs) to reduce disparity is also called for. An official in the financial investment industry said, “As the ETF market grows, the number of products that LPs must manage also increases,” adding, “To stably manage disparity, the market-making function and LP operating capabilities must be continuously strengthened.”