SK Hynix's latest financial report hits a new high: buy individual stocks, index ETFs, or leveraged products?

BIT Securities × Southern Eastern ｜ Investor Education Series

1. Believing in a company doesn't necessarily mean you can only buy its stock

When investors are optimistic about a company's development prospects, the most direct way is to buy its stock. But if the optimism is about the entire industry or a supply chain, is it necessary to bet on a specific company?

Taking the AI storage industry as an example. As the construction of AI data centers continues to advance, high-bandwidth memory (HBM) and other storage products have attracted market attention. SK Hynix, as an important supplier in the HBM field, recently announced record high performance for the third quarter of 2026: quarterly revenue reached 104.62 trillion Korean won, operating profit reached 83.33 trillion Korean won, and the operating profit margin was about 80%.

However, being optimistic about an industry does not mean one can accurately judge the performance of every company. Even if a company's fundamentals are strong, its stock price may still be affected by factors such as valuation, market expectations, industry cycles, and the macro environment.

In addition to directly investing in individual stocks, investors can also participate in the market in different ways through exchange-traded funds (ETFs).

2. What is the difference between individual stocks and ETFs?

Investing in individual stocks: Focusing on the performance of one company

Buying SK Hynix stock means that investors directly bear the risks associated with the company's operational performance, competitive landscape, financial results, and changes in market valuation. If the company's performance exceeds expectations, the stock price may benefit; but if product demand, profit expectations, or market sentiment change, the stock price may also fluctuate significantly.

The advantage of investing in individual stocks is that the target is clear, allowing for concentrated participation in the growth opportunities of a specific company; correspondingly, the investment results are more dependent on the judgment of that company.

Investing in ETFs: Gaining market exposure through a basket of assets or specific strategies

ETFs are funds traded on exchanges. Different ETFs have varying investment scopes and strategies: some track broad market indices, some focus on specific industries, and others track single stocks and employ leveraged strategies.

For investors who wish to participate in a certain market or industry but do not want to concentrate their investments entirely on one company, ETFs that cover multiple stocks can help diversify the unique risks of individual stocks and reduce the work of screening and managing multiple stocks one by one.

What are the characteristics of ETFs?

• Diversifying single company risk: For ETFs holding multiple stocks, the negative performance of a single component stock typically does not completely impact the entire investment portfolio as it would with direct ownership of that stock. However, diversification cannot eliminate market risk.

• More convenient industry or market allocation: Investors can gain exposure to a basket of stocks through index ETFs without having to buy each component stock individually.

• More investment strategy options: The market has both traditional index ETFs and industry ETFs, leveraged products, and inverse ETFs, allowing investors to research different tools based on their own goals and risk tolerance.

• Relatively intuitive trading method: ETFs can generally be bought and sold on exchanges like stocks. However, actual trading costs, liquidity, bid-ask spreads, and fund fees still need to be compared individually.

It is important to note that ETFs are not necessarily less risky than individual stocks. For example, ETFs tracking a single stock still heavily depend on the performance of that stock; ETFs focusing on a single industry may also experience significant volatility due to high industry concentration. Leveraged products involve additional strategic risks.

Therefore, choosing an ETF does not mean it is necessarily safer or easier to profit; the key is to understand the product structure and determine whether it aligns with one's investment goals.

Comparison of Individual Stocks and ETFs

|----------|-----------------------------|--------------------------------------------| | Comparison Dimension | Investing in Individual Stocks | Investing in ETFs | | Risk Diversification | Bearing the operational, governance, and valuation risks of a single company | Holding a basket of stocks can diversify single company risk, but cannot eliminate market risk; single stock or industry ETFs remain relatively concentrated | | Investment Threshold | High-priced stocks may have a high amount per lot, making it difficult for small funds to hold multiple stocks simultaneously | Buying one lot can gain exposure to a basket of stocks, for example, 3121 has 100 units per lot | | Trading Costs (Hong Kong Stocks) | Both buyers and sellers pay a 0.1% stock stamp duty, plus commission and other fees | Trading Hong Kong-listed ETFs is generally exempt from stamp duty, but management fees and bid-ask spreads need to be considered separately | | Allocation Scope | Investing in overseas stocks usually requires opening trading permissions for the respective market and buying individually | Can gain exposure to overseas markets through a Hong Kong stock account, for example, gaining exposure to large Korean stocks through 3121 |

3. Comparing three investment methods using SK Hynix as an example

In the context of continued attention on the AI storage industry, investors can compare different investment tools based on the market exposure they wish to achieve.

Method 1: Directly investing in SK Hynix

Suitable for investors who wish to focus on SK Hynix's own operational performance and are willing to bear the volatility risk of a single company.

SK Hynix's latest quarterly performance is strong, reflecting the demand for AI storage driving the company's business. However, investors still need to consider whether the market has already priced in growth expectations, as well as the potential impacts of future competitive dynamics, capital expenditures, and industry cycles.

Strong company performance does not guarantee that the stock price will continue to rise.

Method 2: Gaining exposure through a Korean market index ETF

For example, 3121.HK Southern Eastern KOSPI 200 ETF tracks the Korean KOSPI 200 index, providing investors with index exposure to the large-cap stock market in Korea. This product was listed on the Hong Kong Stock Exchange on June 18, 2026, adopts a full replication strategy, directly holds index component stocks, and has a management fee of 0.99%.

Compared to directly holding SK Hynix, the index ETF covers multiple companies, which can reduce dependence on a single company. For investors who are optimistic about the overall Korean market but do not want to bet entirely on a single company, this is a method worth exploring.

However, the index ETF does not mean there is no concentration risk. The KOSPI 200 index is highly concentrated in Samsung Electronics and SK Hynix, both of which belong to the semiconductor industry. According to the product's summary, the combined weight of the two may account for more than 50% of the product's net asset value. In other words, holding 3121 will still provide a significant exposure to storage semiconductors, making it more suitable for investors who are optimistic about the leading Korean semiconductor companies but do not want to bet on just one company. Investors should check the latest component stocks and weights on the product's website to understand what they are actually investing in.

Method 3: Amplifying daily exposure through single-stock leveraged products

For investors who are optimistic about a specific company, in addition to directly buying stocks, they can also explore leveraged products that track a single stock.

For example, 7709.HK Southern Eastern SK Hynix daily leveraged product offers up to 2x leverage around SK Hynix. Unlike traditional index ETFs, these products do not diversify risk by holding a basket of stocks but amplify the daily price movements of the underlying stock through leverage.

Compared to directly holding stocks, these products have several characteristics:

• Trading convenience: Can be bought and sold through a Hong Kong stock account, traded in Hong Kong dollars, with 100 units per lot, without needing to open a separate account for the Korean market.

• Loss limited to invested principal: Unlike margin trading, buying the product does not require additional margin calls, with the maximum loss being the invested principal.

• Scale and trading volume: As of early October 2026, 7709 has approximately 4.5 billion USD in managed assets, making it the largest of its kind in Hong Kong and the US, with relatively active trading.

At the same time, it is necessary to understand its operational mechanism before use:

• Daily trading tool: The product only seeks daily leveraged performance; both the issuer and the Hong Kong Securities and Futures Commission clearly indicate that these products are not designed for holding beyond one day.

• Holding costs: The management fee is 1.6%, with an annual recurring expense ratio of about 2.00%, not including swap costs. According to the product summary, the longer the holding period, the more significant the cost impact.

• Volatility and drawdown: Leverage amplifies both gains and losses. For example, from late June to the end of July this year, SK Hynix cumulatively fell about 49% from its peak, while during the same period, 7709's net asset value dropped over 80%. After the drawdown, the product's net value requires a larger increase to return to its original position, and investors should assess their potential losses based on the worst-case scenario before investing.

Investors need to pay special attention to the fact that the daily leverage target does not equal a fixed multiple of long-term cumulative returns. In a continuously volatile market, the compounding effect may cause the product's performance to significantly differ from the cumulative rise and fall of the underlying stock during the same period. Therefore, in addition to focusing on the fundamentals of the underlying company, it is also necessary to fully understand the product mechanism, holding period, and potential drawdown.

Comparison of the Three Methods

The table below compares the three methods to highlight their differences:

|----------|-----------------|-------------------------------|--------------------| | Comparison Item | Directly Holding SK Hynix | 3121 KOSPI 200 ETF | 7709 Daily Leveraged Product | | SK Hynix Exposure | 100%, single company | One of the index component stocks, combined with Samsung Electronics may account for over 50% of net asset value | Approximately 2x daily exposure, single company | | Leverage | None | None | Up to 2x (flexible leverage) | | Intended Holding Period | Determined by the investor | Determined by the investor, can be used for medium to long-term holding | Not designed for holding beyond one day | | Main Costs | Trading commissions and related fees | Management fee 0.99% | Management fee 1.6%, plus swap and option costs | | Main Risks | Risks of single company operations and valuation | Industry and component stock concentration risks | Leverage amplifies losses, multi-day performance deviation, higher costs |

Note: Fees and weight information are sourced from product summaries and issuer announcements and may change; please refer to the latest information on the product's website.

4. Before investing, think clearly about what exposure you want to achieve.

Before selecting individual stocks or ETFs, you can ask yourself a few questions:

• Am I optimistic about a specific company, or the entire industry or market? If the judgment is focused on a specific company, individual stocks may be more direct; if you want exposure to a basket of stocks, you can research the corresponding index or industry ETF.

• How long do I plan to hold? Traditional index ETFs and daily leveraged products have different design goals and should not be viewed with the same holding logic. Daily leveraged products are not designed for holding longer than one day.

• How much volatility and drawdown can I tolerate? You should not only focus on potential gains during upward movements but also consider the possible losses during market reversals.

• What are the actual trading conditions of the product? Compare management fees, bid-ask spreads, trading volume, tracking performance, and product terms to avoid making decisions based solely on recent price fluctuations.

5. ETF Investment Pitfall Guide

Common Misunderstandings

• Holding too many similar ETFs: Buying a large number of ETFs with similar themes may lead to highly overlapping positions, resulting in effects close to holding just one broad-based ETF, which increases management difficulty.

• Only looking at names or popular themes: ETFs themed around "Korea" or "semiconductors" may have significantly different underlying holdings, weights, and rules, so you should check the holdings and product summary before purchasing.

• Only looking at recent gains: Products with significant recent gains do not necessarily align with your investment goals and holding period.

• Treating daily leveraged products as regular ETFs: Daily leveraged products are not designed for holding longer than one day and should not be treated the same way as regular index ETFs.

Practical Considerations

• Compare similar products: If there are multiple products within the same theme, you can compare their size, fees, tracking errors, and trading volume.

• Pay attention to premiums and discounts: The trading price of an ETF may deviate from its net asset value. Products investing in overseas markets are more likely to experience deviations during periods when the underlying market is closed.

• Be mindful of trading hours and order types: Prices may fluctuate significantly during the pre-market auction period for Hong Kong stocks, so consider using limit orders to control execution prices.

• Be aware of currency effects: ETFs investing in overseas assets will be affected by fluctuations in the relevant currency exchange rates.

Summary

Individual stocks and ETFs are not simply a matter of superiority but correspond to different investment goals and risk characteristics.

Investing in individual stocks more directly reflects the performance of a specific company; holding multiple stocks in an ETF can help investors gain broader market exposure. Special products like leveraged ETFs involve additional strategies and risks and should not be confused with traditional index ETFs.

Taking the AI storage industry as an example, whether investors choose to directly invest in SK Hynix or research the Korean market index ETF or single-stock leveraged ETF, they should first understand the product structure, risks, and costs before determining if it aligns with their investment goals.

**Producer and Important Statement

Producer** **: ** This article is jointly produced by BIT Securities and Southern Eastern Asset Management. BIT Securities: BIT (formerly Matrixport) is a trading service platform for U.S. and Hong Kong stocks under the BIT Group, operated by its wholly-owned subsidiary Matrix Gelephu Pte. Ltd. (holding a financial services license in Bhutan's economic special zone), with Hong Kong stock services provided through licensed partner brokers by the Hong Kong Securities and Futures Commission. Southern Eastern Asset Management: The largest ETF issuer in Hong Kong, the first subsidiary of a mainland Chinese public fund company established overseas, focusing on the issuance and management of ETFs and leveraged/inverse products.

Source of information: The product information for 3121 and 7709 mentioned in this article is provided by Southern Eastern Asset Management Limited. Fee and weight information comes from product summaries and issuer announcements and may change; please refer to the latest information on the product website.

Risk Warning: This article is for general market information and investor education only and does not constitute investment advice or recommendations for buying or selling any securities or funds. Investing in securities and ETFs may lead to capital loss; leveraged and inverse ETFs carry higher risks, and investors should read the relevant product documents and fully understand their risks before investing.