South Korea launched single-stock leveraged ETFs on May 27, and it took roughly three weeks for regulators to start sweating. The products, which offer 2x exposure to Samsung Electronics and SK Hynix, have ballooned past 4 trillion won in assets under management and now account for a staggering share of daily trading in the country’s two most important chipmakers.
The Financial Supervisory Service convened a meeting with market participants on June 17 to issue warnings about excessive leverage and push for diversification. Commission restrictions on promotional activities have already been imposed on ETF issuers.
The numbers that spooked regulators
Leveraged ETF trading now accounts for roughly 31% of Samsung Electronics’ daily volume and approximately 38% of SK Hynix’s volume. In English: for every ten shares of SK Hynix changing hands on any given day, nearly four of those trades are tied to leveraged products that have existed for less than a month.
Approximately 16 leveraged and inverse ETFs debuted in the initial wave, primarily offering 2x exposure. Net inflows are expected to reach up to 5.3 trillion won, roughly $3.5 billion.
