The turmoil in Korean stocks—retail investors leverage bets on Samsung and SK Hynix

```

The South Korean stock market has recently experienced record-breaking crashes and strong rebounds, and two leveraged ETFs linked to Samsung Electronics and SK Hynix are increasingly seen by market participants as structural factors amplifying volatility.

After the outbreak of the Iran war, the nearly $4 trillion South Korean stock market took a severe hit, first recording its largest single-day drop ever, followed by the biggest single-day gain since 2008.

The CSOP SK Hynix Daily 2x Leverage Product and CSOP Samsung Electronics Daily 2x Leverage Product, listed in Hong Kong with a combined management scale of $3.3 billion, amplify price swings during key trading periods through daily rebalancing mechanisms.

Korea’s financial regulators have convened special meetings with the industry on the risks of leveraged investments. External warnings say that with Seoul planning to allow such high-risk products to trade domestically, future market volatility under stress scenarios may become even more intense.

Two Chip Stocks Move the Whole Market

Samsung Electronics and SK Hynix together account for nearly 40% of the Korea Composite Stock Price Index (Kospi) weighting, and half the MSCI Korea Index weighting. Their price movements have a decisive impact on the market as a whole.

This highly concentrated structure has long been viewed as a risk in the industry, but until the Iran war triggered market turmoil, few regarded it as an urgent threat.

Because Seoul prohibits single-stock leveraged ETFs from listing locally, Korean investors have flocked to alternative products listed in Hong Kong. The two leveraged ETFs issued by Chinese asset manager CSOP have become among the largest funds under the company’s management.

Jung In Yun, CEO of Fibonacci Asset Management Global, said:

"The rapid expansion of leveraged ETFs linked to Samsung Electronics and SK Hynix is starting to add a structural layer of volatility to the Korean market. Given the significant weights of Samsung and SK Hynix in the Kospi, this creates a feedback loop, amplifying index volatility and raising concerns about greater swings during future stress periods."

Daily Rebalancing Becomes a Volatility Amplifier

Leverage products must rebalance daily to maintain target exposures. When the market falls, long leveraged funds typically reduce their holdings by selling futures or underlying stocks, and this mechanical selling pressure often deepens the decline.

According to a UBS trading desk memo obtained by Bloomberg, on March 3 when SK Hynix shares plunged 16%, rebalancing flows accounted for as much as 60% of the stock’s trading volume in the last hour before closing; on other recent trading days, such flows made up about 30% of the total volume.

Leveraged ETFs tracking the Korean market were largely unnoticed until late last year, when Kospi posted world-leading gains and related products saw a rapid inflow of capital. According to Bloomberg, as of March 5, 2026, global leveraged ETFs tracking Korea saw a net inflow of $4.4 billion this year, likely to set a historical record for a single quarter.

Although this amount is less than 20% of Korea’s total ETF inflows, market participants point out that the daily rebalancing mechanism makes their impact on volatility far exceed what their asset scale suggests.

Even amid market turbulence triggered by the Iran war and surging energy prices, investor enthusiasm for buying does not seem to have diminished. Data compiled by Bloomberg shows that in the past week, CSOP’s SK Hynix and Samsung leverage products ranked second and fourth in global net inflows among leveraged ETFs tracking the Korean market.

Retail Leverage Combined with Foreign Profit-taking

Leveraged ETFs are not the only drivers of this round of volatility. As Kospi rose nearly 140% in the year through February 27, foreign investors started to take profits after the outbreak of the Iran war. Meanwhile, many retail investors who entered the market on borrowed money were forced to unload positions en masse due to margin calls triggered by sharp stock declines.

"This is a retail-leverage-driven market," said Rob Li, managing partner at Amont Partners in New York, discussing Korea, "When a large amount of leverage is layered on, geopolitical shocks tend to trigger much higher volatility."

However, Chan H. Lee, managing partner at Seoul hedge fund Petra Capital Management, believes that professional global macro and multi-strategy institutions also play a significant role behind the wild swings.

"These ETFs are very likely used by so-called multi-strategy 'pod shops'," Lee said, "Their leverage strategies combined with global macro quantitative methods result in price rises and falls much more pronounced than simple retail trading."

Risk Warning and DisclaimerThe market is risky, investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article fit their own circumstances. Invest accordingly at your own risk. ```