The Korean Levered ETFs Shaking Markets All Around the World

**SPEAKER_2** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Tracy Alloway** (0:18)
Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

**Joe Weisenthal** (0:22)
And I'm Joe Weisenthal.

**Tracy Alloway** (0:23)
Joe, when I think about the big market events this week.

**Joe Weisenthal** (0:27)
This week, recording this July 9th.

**Tracy Alloway** (0:29)
July 9th. Macro doesn't feel like it matters that much anymore. So we had renewed hostilities between Iran and the US. Markets, at least as of Thursday morning, don't seem to care too much. We've had some Fed minutes. They didn't really change things that much.
The big stories this week, unusually for the US market, have all stemmed from Korea.

**Joe Weisenthal** (0:54)
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. 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.
The Korean market, we've just come to get used to this major, pretty big market in the grand scheme of thing, 5 percent a day, and we've suddenly all become normalized to it. Yeah, this is the big thing.

**Tracy Alloway** (1:27)
Yeah. 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 US listing from SK Hynix.
The reason Korean stocks are so interesting right now is, it's not just that the US market is 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.

**Joe Weisenthal** (2:03)
It's so funny to me, you look at, again, the performance of some of these chip companies, some of them up like 10x.

**Tracy Alloway** (2:11)
40% is not enough. We need like 86%.

**Joe Weisenthal** (2:12)
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 trading crypto on leverage. It's like, what? You're not getting enough? You need like 20x it? But people love it. And so.

**Tracy Alloway** (2:26)
Yeah, but here's the thing. Even if you personally don't love leverage, leverage has an impact on you.

**Joe Weisenthal** (2:32)
Totally.

**Tracy Alloway** (2:32)
If you're in that market.

**Joe Weisenthal** (2:33)
You may not be interested in leverage, but leverage is interested in you.

**Tracy Alloway** (2:37)
Exactly.

**Joe Weisenthal** (2:38)
That's what one of those guys said.

**Tracy Alloway** (2:39)
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 Altie. He is, of course, the global head of equities tactical strategies over at Barclays. So Altie, Alex, thanks so much for coming on.

**Alexander Altmann** (3:00)
Thank you very much for having me.

**Tracy Alloway** (3:02)
So I believe in one note I read from you, and the reason I wanted to get you on is you specifically used 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?

**Alexander Altmann** (3:20)
I think that the, well, 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.
I think at the time when we wrote about that, it was the local highs of the AUM, it was globally around about $250, $270 billion. 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, or just, it's just meteoric, so just to put some numbers behind that, if we look at, say, the Korean market, which you guys highlighted, at the beginning of the year, APAC, AUM, so Asia-Pacific AUM was somewhere around about 12 or 13 billion. That's now around about 50

**Joe Weisenthal** (4:10)
Sorry, just wait, the AUM within these levered ETFs? Of levered products.

**Alexander Altmann** (4:13)
Of levered products in Asia.
They are now around about 50 to 55 billion dollars, so talking about a threefold increase or plus over a relatively short period of time. And here in the US, if you take the beginning of April, excuse me, yeah, beginning of April, which was, of course, the local lows for the market, we were talking around about 120-odd billion here in the US, and that's now increased, I think, at its peak. It was just north of 200 billion. So these numbers can move extremely quickly. And what's really interesting is that if you look at the US market, it's not like you've actually seen significant inflows and share creation in that space. Most of that AUM growth has been because of price performance.