South Korea chipmaker leveraged ETFs slide after late-May listings
Regulators and asset managers are weighing tighter safeguards for single-stock leveraged ETFs after sharp losses in Samsung Electronics and SK Hynix-linked products and concerns that rebalancing flows are adding to KOSPI volatility.
More than 10 leveraged ETFs linked to Samsung Electronics and SK Hynix have fallen sharply since launching on May 27, prompting a wider South Korean review of single-stock leveraged products. Authorities are due to examine risks at a Thursday F4 meeting, while 10 large asset managers have discussed tougher investor protections, including raising the current 10 million won ($6,714) minimum deposit and staggering daily rebalancing trades. Regulators and industry groups say the products’ leverage and routine rebalancing may amplify volatility and liquidity strains, though cited market data do not establish that the ETFs alone caused recent KOSPI swings.
- single-stock leveraged ETF: A fund designed to amplify the daily return of one company’s shares, such as 2x the stock’s move.
- F4 Meeting: South Korea’s macroeconomic and financial coordination meeting involving the finance ministry, Financial Services Commission, Financial Supervisory Service and Bank of Korea.
- rebalancing: Adjusting holdings to maintain a target leveraged exposure, which can create concentrated trading flows.