Korea launched 2x single-stock leveraged ETFs 9 weeks ago. Today the finance minister apologized for them in parliament, and the KOSPI got halted for the second day in a row
u/valbolt ·
Reddit — r/ValueInvesting
· July 30, 2026 at 14:54
· ⬆ 16 pts
· 💬 1 comments
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Summary
The post describes a Korean market crash triggered by SK Hynix’s record profit missing estimates, exacerbated by massive liquidations of 2x single-stock leveraged ETFs that lost $1.5 billion in 9 weeks.
The author’s thesis is that daily-reset leverage decay makes these products toxic; the same structure exists in the US, and upcoming Microsoft/Meta earnings could face similar fragility.
Quality assessment: Well-researched DD – uses Bloomberg and IBTimes sources, explains mechanics, and draws a clear parallel to US markets.
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The trigger is almost absurd. \*\*SK Hynix posted the most profitable quarter in Korean corporate history - 60.5 trillion won in operating profit, up over 550%\*\* (Bloomberg) - and it still missed estimates. The stock fell about 10%, the index dropped 8%, and Korea got its first back-to-back circuit breakers ever. July is now the worst month in KOSPI history.
But the earnings aren't the real story. The leverage is. Retail investors lost about $1.5 billion in those nine-week-old ETFs, and over 320,000 accounts were force-liquidated (IBTimes). The 2x SK Hynix product is down 80% from June while the stock itself is down far less. That's daily-reset decay: the underlying can recover, the 2x holder doesn't.
Nobody cut AI demand forecasts today. A company growing revenue 257% got sold anyway.
The US lists the exact same product structure.
\*\*And Microsoft and Meta report tonight into this exact mood....\*\*
Source: \[https://www.bloomberg.com/news/articles/2026-07-29/korean-stocks-tumble-a-second-day-as-sk-hynix-results-disappoint\](https://www.bloomberg.com/news/articles/2026-07-29/korean-stocks-tumble-a-second-day-as-sk-hynix-results-disappoint)
The 2x SK Hynix ETF lost 80% while the stock fell far less, and US markets list identical 2x single-stock leveraged ETFs (e.g., MSTX for Microsoft). With Microsoft and Meta reporting into the same fragile mood, the daily-reset decay mechanism could trigger outsized losses in these leveraged products even on modest underlying moves. Shorting MSTX captures the structural decay risk amplified by volatile earnings season, independent of Microsoft’s fundamental direction. Microsoft’s earnings beat could lift the underlying stock sharply, temporarily masking leverage decay; shorting leveraged ETFs incurs funding costs and volatility drag.