South Korea’s Central Bank Raises Red Flag Over Leveraged Samsung and SK Hynix ETFs

South Korea’s central bank has warned that leveraged ETFs tied to Samsung Electronics and SK Hynix are stirring up volatility and pulling trading toward one sided bets. These funds aim to double a stock’s daily move, so a 3% rise in Samsung would push the ETF up 6%, and a 3% drop would send it down 6%.

Assets Grew Fast, Retail Investors Took the Hit

Approved in April 2026, the ETFs pulled in cash quickly, growing from about $3 billion to nearly $9.1 billion by mid June. Retail traders hold 92% of these funds, and many have seen steep losses. FSS Governor Lee Chan-jin admitted the approval came too fast, saying the fallout became obvious soon after.

Daily Rebalancing Adds Extra Pressure

Since these ETFs rebalance every day to hit their target return, they end up buying into rallies and selling into drops, adding pressure on the underlying stocks. This comes as South Korea’s margin debt hit a record 60 trillion won, about $39 billion, with leveraged ETF demand named as a factor.