Semiconductors have dominated the financial press this month, as the “AI Trade” unwound dramatically with the Korean KOSPI correcting more than 30% in a few volatile weeks. Leverage has been a huge issue here after South Korea introduced single-stock leveraged ETFs on SK Hynix and Samsung Electronics in late May. The products attracted huge inflows into the “Hot Stocks”, with leveraged ETF assets in South Korea more than tripling to KRW 35.4 trillion by end of May 2026.
- Total Korea-listed leveraged ETF AUM currently stands at approximately KRW 29.5 trillion (~$20 billion), down nearly 30% from peak levels.
However the real picture is painted by the leveraged ETFs, the 2x leveraged SK Hynix ETF (HK 7709) has already plunged over 75% in less than one month illustrating 2 points:
- Leverage is exciting but can be very dangerous when the music stops playing – we believe they’re short term vehicles for speculation.
- When leverage is combined with crowded ETF positioning we shouldn’t underestimate how deep corrections can become.
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Korean KOSPI Index Fund Flow into 2x leveraged SK Hynix ETF (HK 7709) – Source Bloomberg
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Korean KOSPI Index Fund Flow into 2x leveraged SK Hynix ETF (HK 7709) – Source Bloomberg
