South Korea’s retail frenzy around leveraged bets on Samsung Electronics and SK Hynix is no longer just a growth story for asset managers. Regulators are now treating it as a market stability issue.
Since their May 27 debut, the country’s first single-stock leveraged products have become one of the most crowded trades in the latest Korean semiconductor rally. The group includes 16 single-stock exchange-traded funds and two exchange-traded notes built around Samsung Electronics and SK Hynix, giving investors a way to make roughly 2x directional bets on individual stocks. Their launch coincided with rising enthusiasm around the AI memory cycle, bringing in strong retail demand and helping lift total assets in Korea’s ETF market to a record high at one point.
Nearly KRW 3.7 billion in fees in about two months
The fee windfall showed up quickly. Based on assets under management and fee rates, the batch of single-stock leveraged ETFs generated close to KRW 3.7 billion in cumulative management fees in roughly two months.
Samsung Asset Management took a large share through the scale of its KODEX products and relatively higher fee rates. Mirae Asset pursued market share with lower fees. Earlier Korean media data showed that Samsung and Mirae Asset together held more than 90% of net assets in the category, with liquidity continuing to cluster in the largest products.
Regulators flagged concentration and volatility
In mid-July, South Korea’s Financial Services Commission said the products’ market capitalization and trading value had risen quickly after listing, and that Samsung Electronics and SK Hynix at one point accounted for 52% of the KOSPI.
The regulator also said volatility in global memory stocks had risen sharply. In its view, high volatility in names such as SK Hynix and Samsung Electronics, combined with rebalancing trades from the products, could amplify market impact.
Rules tightened from July 31
Authorities then moved faster to tighten the framework. From July 31, the minimum base margin requirement for retail investors in these products was raised from KRW 10 million to KRW 30 million. The requirement must now be met in cash, with substitute securities no longer accepted.
Regulators also halted the listing of new related products, restricted advertising, and stepped up spread management and investor education.
Trading volume slumped after the crackdown
Market activity has already cooled. Korea Exchange data showed that after the new rules appeared, daily turnover in the 16 related single-stock leveraged and inverse ETFs fell from about KRW 10 trillion to KRW 12 trillion to around KRW 1 trillion. At the peak, daily turnover had reached KRW 15 trillion to KRW 20 trillion.
On Aug. 3 and Aug. 4, turnover was around KRW 1 trillion. On Aug. 5, it dropped to KRW 919.8 billion, the first time it had fallen below KRW 1 trillion. Trading has recovered slightly more recently, with turnover in the 16 ETFs at about KRW 7.45 trillion on July 27.