Leveraged exchange-traded funds (ETFs) linked to Samsung Electronics Co. and SK Hynix Inc. are now responsible for an overwhelming 70% of South Korea's daily stock trading value. This significant concentration means that these two chipmakers, and the ETFs designed to magnify their daily price movements by two-fold, are largely driving the activity in the Korean stock market.
Initially launched in May 2026, these single-stock leveraged ETFs have grown rapidly, with one ETF tied to SK Hynix reaching $13 billion. This rapid expansion has been identified as a key factor in increasing volatility. For instance, a 10% plunge in the Kospi index, triggered by a tech stock rout, was largely attributed to the influence of these ETFs, which subsequently caused a 3% dip in the Nasdaq.
The Bank of Korea (BOK) and financial regulators have expressed serious concerns about the market impact. The BOK warned that these ETFs deepen market concentration and intensify one-way trading flows. Similarly, the Financial Supervisory Service (FSS) has regretted allowing their launch and is considering measures to curb their negative side effects and stabilize the market, given the enhanced risks they pose to the overall financial system. There are reports that these leveraged ETFs have sold $6 billion of Korean chips in July alone.
Regulators are particularly worried as Samsung and SK Hynix already represent more than half of South Korea's stock market capitalization and trading volume. The introduction and rapid adoption of these highly leveraged products, especially by retail investors, have amplified both potential gains and losses, posing a systemic risk to an already concentrated market.
