South Korea to launch its first-ever single-stock leveraged ETFs, allowing retail investors to bet 2x on Samsung and SK Hynix

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South Korea is about to witness a historic breakthrough with single-stock leveraged ETFs (single-stock leveraged ETFs). The first batch of products will be anchored to the two semiconductor giants—Samsung Electronics and SK Hynix—and may debut as early as May this year.

On Monday, Bloomberg cited Korea Economic Daily reporting that Samsung Asset Management and Mirae Asset Global Investments have started preparing related products. The Financial Services Commission (FSC) announced in January that it would accelerate the approval process for single-stock products and is currently negotiating details with various parties.

The single-stock leveraged ETFs being launched aim to track twice the daily fluctuation of the underlying stock, meaning that for every 1% movement in the stock, the net asset value of the fund will change by about 2%. Regulators have also set multiple restrictions to guard against excessive speculative risks.

Korean retail investors previously flocked to similar products in Hong Kong

South Korea previously imposed a clear ban on the listing of single-stock leveraged ETFs domestically, citing the high risks of such products. However, this ban failed to curb the speculative enthusiasm of Korean retail investors, prompting a large number of risk-loving investors to turn to Hong Kong to purchase similar products listed locally.

Samsung Electronics and SK Hynix have seen their stock prices surge over the past year, benefiting from persistently strong AI-driven chip demand, until the Iran war turned market sentiment more cautious. The two stocks are highly concentrated in trading on the Korean market, and are the most active targets for retail funds.

FSC officials stated that regulators are discussing with relevant parties according to the January announcement and are committed to ensuring smooth implementation of the system.

Regulators impose dual restrictions to prevent overheated competition

Regarding risk control, the FSC set the maximum leverage at twice the underlying stock’s fluctuation, lower than the industry’s previous expectation of three times. This move aims to limit the amplification effect of product volatility. Regulators may also stipulate that each institution can launch only one single-stock leveraged ETF product, to prevent excessive speculation and overheated market competition.

Analysts pointed out that single-stock leveraged ETFs have inherent risks of amplifying volatility, and in Korea’s retail-driven market, this effect may be particularly pronounced — market funds have always been highly concentrated in semiconductor heavyweights. If these products are launched on a large scale, they may further intensify short-term volatility in individual stocks.

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