South Korea will launch its first single-stock leveraged exchange-traded funds (ETFs) this Wednesday, May 27, tracking Samsung Electronics and SK Hynix shares with twice the daily leverage [1]. These ETFs aim to deliver two times the daily price moves of the underlying stocks, with the potential for price swings as high as 60% within a single trading day [2, 3, 1].
Eight asset management firms including Samsung, Mirae Asset, KB, Korea Investment, Shinhan, Hanwha, Kiwoom, and Hana Asset Management will issue the leveraged ETFs [1]. A key requirement for investors is completing mandatory general and advanced education courses and maintaining a margin of at least 10 million Korean won before investing [1]. As of May 21, more than 100,000 individuals have applied for the pre-investment courses, with over 93,000 having completed them [1].
The launch responds to Korean regulators lifting a previous ban on single-stock leveraged ETFs, which was imposed over concerns about high risks. The reversal aims to attract local retail investors back from overseas leveraged products [2, 1]. Over 14 million retail investors in South Korea are expected to express strong demand for these products [2, 3].
There are warnings about possible negative effects on market stability. Jung In Yun, CEO of Fibonacci Asset Management Global, said the ETFs "will intensify the existing problem — the concentration risk," adding that it could keep volatility in the Korean market elevated and challenging for long-term investors [2]. It is common for the KOSPI to experience intraday swings of 5%, so the addition of leveraged ETFs might increase market volatility [2, 3].
Samsung Asset Management Vice President Kim Doo-nam highlighted that while the ETFs track 2x daily returns, they do not guarantee double long-term gains due to volatility drag. He cautioned investors that even if the underlying asset rises, returns may fall short of expectations if markets remain turbulent. Kim also warned about liquidity risks, saying, "If trading volume is insufficient or liquidity is lacking, actual transaction prices may exceed fair values, so investors should compare volume and liquidity between products" [1].
Year-to-date inflows into Hong Kong-listed 2x leveraged ETFs tracking Samsung shares have reached about $1.3 billion, exceeding similar US tech leveraged ETFs [2]. In May, Korean investors have been net sellers of US stocks, with some expected to shift funds back to domestic leveraged single-stock ETFs due to tax advantages [1]. Leveraged ETFs typically see short average holding periods around three days [1].
The launch on May 27 marks the start of these high-leverage products in South Korea’s domestic market under strict investor education and margin rules [1].
