Korean exchange-traded funds (ETFs) tracking semiconductor stocks roiled semiconductor markets in Japan and the US, as a rapid expansion of retail investment was reported alongside a sharp subsequent decline. ETFs targeting twice the performance of Samsung Electronics and SK hynix listed in May, and their assets grew rapidly.
Leveraged ETFs tracking semiconductor stocks in South Korea are creating conditions that are having a major impact on market movements in Japan and the US. On 27 May, an ETF targeting twice the rate of change in the share prices of Samsung Electronics and SK hynix made its initial listing, attracting a concentration of retail investor funds over a short period. As of 6 July, the total net assets of these leveraged ETFs had swelled to approximately ₩14.9 trillion. / At the same time, some observers have pointed out that “pittゥ” (debt-financed investment) had taken hold as semiconductor stocks surged, fueled by the AI boom involving companies such as IBM.
Media outlets in Japan and South Korea successively linked the market disruption to the impact of leveraged ETFs. The flow of funds from South Korean investors created an environment in which large profits could be pursued with limited capital, but a major reversal occurred in mid-July. The KOSPI plunged from around 13 July, and the broader market decline became pronounced, with trading temporarily suspended at one point.
## The authorities introduced an iron-fisted regulatory crackdown against a backdrop of overheated retail investment and efforts to control risk. From late July onward, measures including the temporary suspension of new listings, higher basic deposit requirements for individuals, and mandatory simulated trading were implemented in succession. This made increasingly clear the authorities' aim of prompting investors to unwind their positions and stabilizing the market.
## The background includes long-term lessons from the financial markets. Rising interest rates set by the Bank of Korea and the increasing burden on the housing market altered the flow of funds from individuals, and investment through leveraged ETFs has been debated as a social issue. While the government has encouraged the use of leveraged ETFs to curb the won's decline, it has now shifted toward tighter regulation to contain overheating.