South Korea will launch its first-ever single stock leveraged ETFs, allowing retail investors to double their bets on Samsung and SK Hynix

South Korea is about to witness a historic breakthrough with the introduction of single-stock leveraged ETFs, the first products will be anchored to two semiconductor giants, Samsung Electronics and SK Hynix, and are expected to hit the market as early as May this year. On Monday, Bloomberg reported, citing the Korea Economic Daily, that Samsung Asset Management and Mirae Asset Global Investments have begun preparations for related products. The Financial Services Commission (FSC) of South Korea announced in January this year that it would expedite the approval process for single-stock products and is currently negotiating the details with various parties. The newly launched single-stock leveraged ETFs aim to track twice the daily price fluctuations of the underlying stocks, meaning that for every 1% movement in the underlying stock, the fund's net asset value will change by approximately 2%. The regulatory authorities have also set multiple restrictions to prevent excessive speculation risks. South Korean Retail Investors Previously Flooded into Similar Products in Hong Kong South Korea had previously explicitly prohibited the listing of single-stock leveraged ETFs domestically, citing the high risks associated with such products. However, this ban did not dampen the speculative enthusiasm of South Korean retail investors; instead, it prompted a large number of high-risk retail investors to turn to Hong Kong to purchase similar products listed there. The stock prices of Samsung Electronics and SK Hynix have surged significantly over the past year, benefiting from strong demand for chips driven by artificial intelligence, until the Iran war caused market sentiment to turn cautious. The trading of these two stocks is highly concentrated in the South Korean market, making them the most active targets for retail funds. FSC officials stated that the regulatory authorities are discussing with relevant parties in accordance with the announcement made in January and are committed to ensuring a smooth implementation of the system. Regulatory Authorities Set Dual Restrictions to Prevent Overheated Competition In terms of risk control, the FSC has capped the leverage ratio at twice the price fluctuations of the underlying stocks, which is lower than the previously expected three times level in the industry. This move aims to limit the volatility amplification effect of the products. The regulatory authorities may also stipulate that each institution is only allowed to launch one such leveraged ETF product to prevent excessive speculation and overheating competition in the market. Analysts point out that single-stock leveraged ETFs carry inherent risks of amplifying volatility, and in South Korea, where retail investors dominate the market, this effect may be particularly pronounced — market funds have historically been highly concentrated in semiconductor heavyweight stocks, and once related products are launched on a large scale, it may further exacerbate short-term volatility of individual stocks.