--- title: "Leveraged ETFs are becoming a nightmare for the South Korean stock market, with trillions of won in leveraged funds being trampled and massive capital fleeing! SK Hynix plummeted 15.4%, falling nearly 40% from its historical high, which may trigger a vicious cycle of leveraged funds worth up to 271 trillion won dumping stocks" type: "News" locale: "en" url: "https://longbridge.com/en/news/292455884.md" description: "The South Korean stock market experienced a massive sell-off of leveraged ETFs due to the plummeting stock prices of SK Hynix and Samsung Electronics. On July 13, the KOSPI index fell by 8.95%, triggering a circuit breaker, with SK Hynix dropping by 15.4% and Samsung falling by over 9%. The total scale of broad leveraged products reached 271 trillion won, highly concentrated in these two giants, leading to a significant decline in related leveraged ETFs and spreading panic to the Hong Kong and A-share markets" datetime: "2026-07-13T08:15:50.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/292455884.md) - [en](https://longbridge.com/en/news/292455884.md) - [zh-HK](https://longbridge.com/zh-HK/news/292455884.md) --- # Leveraged ETFs are becoming a nightmare for the South Korean stock market, with trillions of won in leveraged funds being trampled and massive capital fleeing! SK Hynix plummeted 15.4%, falling nearly 40% from its historical high, which may trigger a vicious cycle of leveraged funds worth up to 271 trillion won dumping stocks Leveraged ETFs are becoming a nightmare for the South Korean stock market, with trillions of won in leveraged funds triggering a massive capital exodus! On July 13, the South Korean KOSPI index suffered another sharp decline, triggering the full market circuit breaker for the seventh time this year in the afternoon session, falling below the 7000-point mark during trading. By the close, the KOSPI index dropped 8.95%, closing at 6806.93 points, a decline of over 27% from the historical high of 9385.59 on June 19. The two major memory giants, SK Hynix and Samsung, both experienced significant drops, with SK Hynix's stock price plummeting 15.4% at the close, marking the largest decline on record, down nearly 40% from its historical peak, with a total market value falling below $900 billion, surpassed by JP Morgan, Walmart, and AMD, dropping to 19th place globally. Another giant, Samsung Electronics, fell over 9%, down more than 30% from its high on June 19. Notably, since the beginning of the year, the South Korean stock market has triggered the suspension of programmatic trading about 30 times, exceeding the 26 times during the 2008 financial crisis. Under the impact of the sharp declines in SK Hynix and Samsung, the locally traded leveraged ETFs for Samsung Electronics and SK Hynix have been severely hit. Among the previous 14 products, except for the KODEX SK Hynix single-stock leveraged ETF, the other 13 had already fallen below the issuance price of 20,000 won as of July 7. Currently, as of June 26, the total scale of leveraged products in the South Korean stock market has reached approximately 271 trillion won, with leveraged products highly concentrated in Samsung Electronics and SK Hynix. Now, this portion of funds has begun to flee in a stampede. Additionally, the 2x long Samsung Electronics ETF traded in Hong Kong once fell over 24%, and the 2x long SK Hynix leveraged ETF dropped over 34% in a single day, plummeting from HKD 193.65 to HKD 59.9 in just 12 trading days, a drop of 60%. The A-share market was also affected, with the Shanghai Composite Index closing down 2.06% at 3913.79 points, the Shenzhen Component Index down 3.48% at 14522.85 points, the ChiNext Index down 3.1% at 3723.52 points, and the STAR 50 Index down 3.42% at 1994.32 points. Over 4600 stocks in the Shanghai, Shenzhen, and Beijing markets were in the red, with more than 170 stocks hitting the daily limit down, among which the memory sector became a hard-hit area. By the close, Xiangnong Xinchang hit the limit down, Puran Co., Beijing Junzheng, and Baiwei Storage fell over 12%, while Zhaoyi Innovation and Jiangbolong both dropped over 10%. It is noteworthy that the current bull market in the South Korean stock market has also shown characteristics of a "leveraged bull." According to a research report from China International Capital Corporation, as of June 26, the total scale of leveraged products in the South Korean stock market has reached approximately 271 trillion won (about 1.2 trillion yuan), equivalent to 6.2% of the free-floating market value. Among them, the financing balance of brokerage firms (core stocks) has climbed to a historical high of 38 trillion won (about 0.17 trillion yuan), a year-on-year increase of 125%; the total scale of global Korean stock leveraged ETFs has reached $46.9 billion (about 317.968 billion yuan), accounting for 1.5% of the free-floating market value of Korean stocks Since the listing of the double-leveraged ETF targeting Samsung Electronics and SK Hynix on the Korea Exchange on May 27, the scale of related products has rapidly expanded to 17 trillion won (approximately 0.075 trillion yuan) in less than a month. Combined with similar products listed in Hong Kong amounting to 31 trillion won (approximately 0.14 trillion yuan), the total scale accounts for 1.2% of the combined market value of Samsung Electronics and SK Hynix. Additionally, there exists a 3x long Korea ETF (KORU) in the United States. Korean brokerage firms (core stocks) have a minimum financing margin ratio of only 40%, allowing for a maximum leverage of 2.5 times. According to data disclosed on the website of the Korea Financial Investment Association (KOFIA), as of July 2, the balance of credit trading financing in the Korean stock market was approximately 37.7 trillion won (approximately 0.17 trillion yuan), an increase of about 40% compared to 27 trillion won (approximately 0.12 trillion yuan) at the end of 2025; the guaranteed financing for entrusted securities increased from over 24 trillion won to 25 trillion won (approximately 0.11 trillion yuan) during the same period. Nowadays, the tools that once contributed to the surge in the Korean stock market are becoming a nightmare for it. With the sharp decline of the leveraged ETFs for Samsung Electronics and SK Hynix, it may trigger a vicious cycle of forced ETF sell-offs, accelerated declines in the underlying stocks, and further rebalancing sell-offs and forced liquidations. Recently, there have been continuous remarks questioning that the Korean Composite Stock Price Index "has become a casino." On the 6th, Ahn Cheol-soo, a member of the People Power Party and former presidential candidate, called on social media for the leveraged ETFs of Samsung Electronics and SK Hynix to be "completely failed in policy," and corrective measures, including delisting, should be taken to restore normal operations in the Korean stock market. Ahn also stated that the Korean Composite Stock Price Index "has degenerated into a casino." He urged Korean President Lee Jae-myung to hold relevant officials of the financial regulatory agency accountable. Previously, on June 22, Lee Chan-jun, the head of the Financial Supervisory Service of Korea, expressed regret over the overheated investment phenomenon in the single-stock leveraged ETFs of Samsung Electronics and SK Hynix, stating that such products only allowed brokerage firms (core stocks) to profit immensely, and the regulatory authorities are formulating measures to ensure investor safety. At that time, Lee mentioned that the peak turnover rate of such products was close to 200%, and it was estimated that brokerage firms could earn up to 10 trillion won (approximately 4.4 billion yuan) solely from transaction fees of these products. Industry insiders in the financial investment sector pointed out that "ETFs are ultimately traded 'funds,' and whether products investing in single stocks align with the original intention of funds is indeed questionable," adding, "It has now degenerated into a gambling tool for short-term speculation, only serving to amplify market volatility." Industrial Securities recently pointed out in a research report that leveraged ETFs have become volatility "amplifiers," with Gamma Squeeze risks gradually accumulating. As of July 1, the management scale of leveraged ETFs tracking Korean stocks surged to approximately $43 billion, with overseas ETFs accounting for about 42.8% of the management scale, and leveraged products highly concentrated in Samsung Electronics and SK Hynix, further exacerbating the concentration risk. The core risk lies in market makers conducting daily mechanical rebalancing to anchor daily target returns, as the cash flow scale of daily adjustments is positively correlated with leverage levels and daily returns, exhibiting a pro-cyclical characteristic of "buying high and selling low," which can easily trigger a "Gamma Squeeze" during market reversals Once the technology narrative loosens, blue-chip stocks may face liquidity shocks and "stampede" risks far exceeding their fundamentals. Industrial Securities estimates that if the price of the underlying asset fluctuates by 5% within a day, the rebalancing cash flow of leveraged ETFs, estimated based on the AUM on July 3, would be approximately $3.6 billion, with SK Hynix and Samsung Electronics facing liquidity shocks of about $1.83 billion and $890 million respectively, accounting for 20.1% and 12.8% of their average daily trading volumes. 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