South Korea raises concerns over leveraged ETF trading boom that tripled assets to $9.1 billion

South Korea approved 16 single-stock leveraged ETFs at the end of May. Within weeks, regulators were already calling the decision “hasty.”

The products, which offer 2x daily exposure to Samsung Electronics and SK Hynix, launched on May 27 with roughly $3 billion in assets. By June, that figure had ballooned to approximately 14 trillion won ($9.1 billion). Retail investors hold 92% of those combined assets.

A market correction with leverage on top

On June 23, the KOSPI index dropped nearly 10%, triggering a trading halt.

Hong Kong-listed 2x leveraged products tied to SK Hynix saw declines exceeding 23% following the KOSPI drop.

FSS Governor Lee Chan-jin acknowledged that these products played a role in the recent market disruptions. That’s notable because it’s the same regulatory body that approved them barely a month earlier.

Retail margin debt hit a record 60 trillion won ($39 billion) at the end of May. The new leveraged ETFs contributed to that surge.

A pattern regulators should have seen coming

This isn’t South Korea’s first brush with retail leverage anxiety. Regulators issued warnings about retail flows into overseas leveraged ETFs back in 2022. In 2025 and 2026, new rules were implemented requiring investors to complete training before trading foreign leveraged products.

The irony is hard to miss. While South Korean regulators were building guardrails around foreign leveraged products, they simultaneously approved domestic ones that attracted $9.1 billion in retail money within weeks.

The 92% retail ownership figure tells a story on its own. Institutional investors largely stayed away while retail traders piled in.

What this means for investors

The FSS is now considering additional measures to stabilize the market.

These products are designed for single-day trading, not buy-and-hold strategies. Over time, the daily compounding effect can erode returns even when the underlying stock moves sideways.

Trading volume in the affected ETFs remains elevated despite the recent turmoil.

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