Retail investors drive leveraged ETFs to 70% of South Korea’s $4.3T market
South Korea’s retail traders, known locally as “ants,” have essentially taken over the country’s stock market. Leveraged ETFs and two chipmaker stocks now account for more than 70% of trading activity in a market valued at $4.3 trillion.
How two stocks swallowed a market
The frenzy centers on single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix, both semiconductor heavyweights riding the global AI wave. These products launched in late May 2026 and immediately became the hottest trade in town.
Approximately 92% of holders in these ETFs are individual retail investors.
Assets under management in the new domestic ETFs surged from roughly $3 billion at inception to around 14 trillion won, approximately $9.1 billion, in a matter of weeks. The broader leveraged ETF market in Korea has ballooned to somewhere between $40 billion and $45 billion, setting records along the way.
Margin debt for retail stock trading hit a record 60 trillion won (around $39 billion) by the end of May 2026. Much of that borrowing was fueled by demand for these exact leveraged products.
What went wrong
In mid-June 2026, a significant selloff sent domestic leveraged ETFs plummeting by approximately 25% in a single day. Related products listed in Hong Kong fell over 23%.
The selloff triggered a chain reaction that rippled through global chip stocks.
The Financial Supervisory Service, South Korea’s top financial regulator, was not thrilled. FSS Governor Lee Chan-jin publicly expressed regret over what he characterized as rushed approvals for these ETFs on June 22, 2026. The regulator acknowledged the products’ inherently high-risk profile, despite having issued prior warnings about the potential for increased market volatility.
The AI chip trade on steroids
These products amplify daily returns, typically by 2x, meaning a 5% drop in Samsung’s stock translates to roughly a 10% loss for the leveraged ETF holder. The math of leveraged ETFs is deceptively cruel. A stock that drops 10% and then rises 10% doesn’t return to breakeven. A 2x leveraged ETF tracking that same move ends up even further in the hole due to volatility decay.
What this means for investors
The FSS has already hinted at potentially stabilizing measures, and discussions around possible delistings of some leveraged products have surfaced.
The margin debt figure is the number to watch. At 60 trillion won and climbing, it represents a massive amount of borrowed capital that must be repaid regardless of which direction stocks move.
Leveraged ETFs are designed for short-term tactical trading, not conviction bets held through volatility. The 92% retail ownership figure suggests a lot of investors may not fully appreciate that distinction.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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