Strong demand for AI chips has led to sharp rises in the stock prices of South Korean semiconductor giants Samsung Electronics and SK Hynix, while the explosive growth of leveraged ETFs linked to these companies has caught the attention of regulators.
South Korea’s Financial Supervisory Service (FSS) has begun evaluating several stability measures in response to rising trading volume and investor interest in leveraged ETFs based on individual stocks such as Samsung and SK Hynix. Regulators are particularly concerned about the potential impact of sharp price fluctuations in these products on individual investors.
FSS Chairman Lee Chan-jin said in a press release that the agency is monitoring trading activities more closely and is working with the Financial Services Commission and the Korea Exchange on various market stabilization mechanisms.
Lee said that since the investors in these products are largely middle-class and salaried workers, high volatility could have serious consequences for household finances. “The majority of investors are from the middle class and salaried workers. Increased volatility could have a significant impact on families,” Lee said.
As the AI boom has sparked interest in semiconductor companies across global markets, South Korean chipmakers have also emerged as some of the most prominent companies in recent times. Samsung Electronics and SK Hynix have demonstrated strong stock performance thanks to their critical roles in AI chips and memory technologies, while the size of ETFs tracking these stocks has also grown rapidly.
According to data, the total size of the 16 leveraged ETFs launched by the end of May stood at approximately $3 billion. Lee Chan-jin stated today that the size of these products had reached approximately 14 trillion won—or about $9.1 billion—in a short period.
Lee warned that these products carry high risk and expressed concern about the investor profile from the regulators’ perspective. The FSS Chairman said, “These are high-risk products, and approximately 92 percent of their holders are individual investors.”
While leveraged ETFs offer investors the potential for higher returns through derivatives and swap contracts, they also increase the risk of losses and volatility. Despite a strong recent rally in the South Korean stock market, the rapid growth of leveraged products has heightened regulators’ concerns about systemic risk.
Lee Chan-jin also said that the impact of leveraged ETFs linked to Samsung and SK Hynix on the South Korean won is limited at this stage.
