The Korean Levered ETFs Shaking Markets All Around the World
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Hello and welcome to another episode of the OddLots Podcast. I'm Traci Alloway.
And I'm Joe Wiesenthal.
Joe, when I think about the big market events this week.
This week. This week.
We're recording this July 9th. July 9th. Macro doesn't feel like it matters that much anymore. So we had renewed hostilities between Iran and the U.S. Markets, at least as of Thursday morning, don't seem to care too much. You know, we've had some Fed minutes. They didn't really change things that much. The big stories this week, unusually for the U.S. market, have all stemmed from Korea.
Yeah, no, it's true. I mean, look, the chips trade, which then becomes the Korea trade and all of these things, is like the big thing in the entire world. And I agree. I do not think people are going to focus on much of this other stuff. As long as this thing is so crazy and, you know, the Korean market, like, we've just come to get used to this major, you know, pretty big market in the grand scheme of things, moving 5% a day, and we've suddenly all become sort of normalized to it. Yeah, this is the big thing.
Yeah, so the two big Korea events this week, we had Samsung earnings already, and then today, which means we're recording this podcast either at the best or the worst time because we don't know how things are going to shake out, but we have a U.S. listing from SK Hynix. And the reason Korean stocks are so interesting right now is it's not just that the U.S. market is kind of like playing off them as well, but it's because you have all these new products in the Korean market, all these things called single stock levered ETFs, which seem to be having an impact on the overall movement of the underlying shares.
It's so funny to me. You look at, again, the performance of some of these chip companies, some of them up like 10x.
40% is not enough. We need like 86%.
Yeah, exactly. It's like, you know what? I look at this chart. You know what? The one thing I'm missing is some leverage here. This is always also funny to me when people were like trading crypto on leverage. It's like, what? You're not getting enough. You need like 20x it. But people love it.
Yeah, but here's the thing. Even if you personally don't love leverage... Leverage has an impact on you.
Totally.
If you're in that market.
You may not be interested in leverage, but leverage is interested in you. Exactly. As one of those guys said.
All right. So we should talk about all these products. You know, I can't resist a product tail wagging underlying share price dog. So we really do have the perfect guest. We're going to be speaking with Alex Altman, aka Alty. He is, of course, the global head of equities tactical strategies over at Barclays. So Alty, Alex, thanks so much for coming on.
Thank you very much for having me.
So I believe in one note I read from you, and the reason I wanted to get you on is you specifically use the word terrifying to describe the amount of notional exposure coming from levered ETFs. Can you give us a little bit of context about how big this market actually is now?
I think that the, I'll give you the numbers straight away. And as you highlighted, markets are moving really quickly. So these numbers change a lot every day. And I think at the time when we wrote about that, it was the local highs of the AUM. And it was globally around about $250, $270 billion globally. The number itself is actually not enormously terrifying at all. I would just say the asymptotic growth of the AUM over the past few months has been somewhat sensational.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–4:41
2
How did Korean single-stock leveraged ETFs become a major market story?
4:41–16:46
3
How large is the global leveraged ETF market and how fast has AUM grown?
16:46–25:36
4
How do triple- and double-levered ETFs mechanically create market impact?
25:36–42:20
5
How do banks and counterparties provide leverage to ETF issuers?
42:20–45:34
Speakers
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