Leveraged Financing Costs for SK Hynix Korean Shares Halved as Banks Reopen for New Deals
Nashnova编辑部
The swap spread for leveraged bets on SK Hynix Korean shares has plunged from over 1,000 bps above SOFR to roughly 150–300 bps — banks that were refusing new orders weeks ago are now actively courting clients, signaling that concentration fears around this AI darling have substantially eased.
How far have financing costs fallen?
In mid-June, some banks quoted SK Hynix swap spreads above 1,000 basis points over SOFR. In recent weeks, quotes from Bank of America, Citi, Goldman Sachs, and JPMorgan have dropped to roughly 150–300 bps.
This means → the "entry fee" for a leveraged position has fallen by more than two-thirds, back into a normal range.
Some of these banks had been outright refusing new swap requests; they are now actively seeking business.
Why did banks refuse orders in the first place?
SK Hynix Korean shares surged more than 11-fold in the 12 months to June 22, with market sentiment overwhelmingly bullish.
Banks feared that over-concentration in a single stock would drive up their own funding costs in the repo market.
In plain terms = too many clients wanted to borrow to buy the same stock; banks worried their "warehouse" was full of one item — and if the price reversed, losses would hit all at once.
What made the concentration risk ease?
Supply side: SK Hynix completed an American Depositary Receipt (ADR) listing last month, giving investors an alternative route to build long exposure — relieving pressure on Korea-listed stock swaps.
Demand side: a sharp tech sell-off in July forced some leveraged positions to unwind; the KOSPI fell 22% last month, its steepest monthly drop since October 2008.
This means → both sides of the equation loosened at once — a new channel diverted demand, while the market downturn forcibly cleared out a wave of old positions.
What is happening with the leveraged ETF?
The CSOP SK Hynix leveraged ETF listed in Hong Kong saw assets fall to under $5 billion as of this Tuesday — less than one-third of its June 25 level.
The product replicates 2× daily returns on SK Hynix Korean shares via swaps and has shifted to a floating daily leverage ratio, still capped at 2×.
Korean regulators have imposed restrictions on retail trading of locally listed single-stock leveraged ETFs — this reflects concerns that the daily rebalancing mechanism amplifies price swings.
What to watch next?
A Bank of America survey shows Asia ex-Japan fund managers have rotated out of tech and cyclicals into defensive sectors.
The rapid cost decline confirms that banks' concentration fears have materially eased — but whether AI-tech sentiment can rebuild and re-inflate swap demand remains the key variable.
In plain terms = banks are no longer scared, but the market hasn't re-excited itself yet — the next AI rally, if it comes, will determine whether this leverage cycle fires up again.
Content is for reference only, not financial advice.