The leveraged ETF tracking SK Hynix has experienced a sharp decline of more than 17%.

As of the latest update, the Southern Fund Two Times Long SK Hynix ETF (HKEX: 07709) is down 17.2%, trading at HK$49.6 with a turnover of HK$10.15 billion.

This follows the South Korean exchange reactivating its SIDECAR mechanism this morning, halting programmatic sell orders on the KOSDAQ market.

The underlying stock, SK Hynix, has fallen over 5% in early trading, continuing its steep decline after posting its largest single-day drop in history yesterday.

In the U.S. market overnight, shares of SK Hynix also tumbled, closing down 9.3%.

The primary catalyst for the sell-off is a recent report from Korea Investment & Securities, which lowered its second-quarter operating profit forecast for SK Hynix to 60.4 trillion won.

This figure is approximately 8% below the market consensus estimate of 65 trillion won.

Some analysts attribute the significant price drop to investors taking profits.

Chan H Lee, managing partner at Seoul-based hedge fund Petra Capital Management, noted that while the ADR listing was highly successful, that success had already been priced into the market.

It is also noteworthy that major memory chip manufacturers, including Samsung, SK Hynix, and Micron, are currently aggressively expanding production capacity.

Morgan Stanley and other major investment banks have previously warned that memory remains a fundamentally cyclical commodity, and any "service provider" premium only exists during periods of supply shortage.