South Korea weighs tighter curbs on single-stock leveraged ETFs amid debt-fueled boom

South Korean authorities are intensifying scrutiny of single-stock leveraged and inverse ETFs tied mainly to Samsung Electronics and SK Hynix, citing investor-protection, household-finance and broader financial-stability risks. The Bank of Korea told parliament that rapid growth in the products could deepen concentration and volatility in the stock market, while Financial Supervisory Service chief Lee Chan-jin warned on July 7 that leverage is spreading across the financial industry and could seriously undermine household financial soundness. Lee told the FSS consumer risk response council that financial firms must clearly explain leverage structures and risks in product design and sales, and must stop marketing that encourages consumers to borrow to invest. The concern follows sharp market dislocations and rapid inflows: one SK Hynix-linked ETF reportedly surged about 50% in a single day even as the underlying stock fell nearly 8%, and on July 7 SK Hynix fell 5% while the Hong Kong-listed South Korea 2x Long Hynix product, ticker 07709, dropped from a high of HK$193.65 to a premarket HK$99, according to BlockBeats citing Bitget market data. Between May 27 and June 22, retail investors put more than KRW 8.9 trillion into single-stock leveraged ETFs, and as of June 22 investment in Samsung and SK Hynix leverage ETFs had reached KRW 14 trillion, with retail investors holding nearly 92%. The FSS said brokerage credit balances rose to KRW 37.3 trillion in June from KRW 32.9 trillion at the end of March, while forced liquidations after margin calls climbed to KRW 52.7 billion from KRW 26.2 billion. Lawmaker and former presidential candidate Ahn Cheol-soo has called for stronger action, including delisting products tied to Samsung Electronics and SK Hynix, while regulators are considering tighter constraints on margin-based and credit-backed trading.