South Korea's leveraged semiconductor ETF plummeted 45%, causing heavy losses for retail investors.

More than a dozen single-stock leveraged ETFs listed in South Korea at the end of May have seen sharp declines, with several products tracking Samsung Electronics and SK Hynix nearly halving in price. Among them, the "SAMSUNG KODEX SK Hynix Single-Stock Leveraged ETF" — which has an asset size of $3.4 billion — has fallen roughly 45% since its launch, with a drawdown of over 60% from its June peak. The total asset size of related products stands at around $3 billion. On Monday, SK Hynix recorded a historic 15% drop; on Tuesday, it fell more than 8% intraday, and the KOSPI index once tumbled 5% to below 6,500 points. Jung In Yun, CEO of Fibonacci Asset Management, noted that many retail investors view leveraged ETFs as long-term investment vehicles, and the steep declines have left them with significant losses, potentially weakening their willingness and ability to continue purchasing semiconductor stocks. South Korea’s top financial regulator expressed regret last month over approving the listing of such products, yet retail trading enthusiasm has not cooled notably. Over the past month, South Korean leveraged and inverse exchange-traded products have attracted a combined $3.8 billion in inflows, primarily directed toward single-stock products tracking SK Hynix and Samsung Electronics. Jung In Yun predicts regulators will likely tighten suitability requirements, risk disclosures and investor education, rather than imposing a full ban on the products. On the same day, the South Korean government raised its 2024 economic growth forecast from 2% to 3%, stating that AI chip demand will continue to offset some of the headwinds from Middle East conflicts, and projects this year’s current account surplus will hit a record $290 billion.