South Korea Regulator Unveils Curbs on High-Risk ETFs — Update

By Kwanwoo Jun

South Korea's top financial regulator unveiled measures to curb risks from single-stock leveraged exchange-traded funds, seeking to stabilize a local stock market that has seen wild swings, as retail investors use debt to chase profits amid artificial-intelligence-related jitters.

The Financial Services Commission said Thursday that it would suspend new listings of single-stock leveraged ETFs, ban securities firms and asset managers from advertising or marketing such products, and triple the minimum cash deposit for new investments to 30 million won, equivalent to around $20,000.

The measures are aimed at curbing speculative trading and reducing risks tied to highly leveraged investment products following recent bouts of market volatility.

Most of these ETFs, launched in South Korea in May to track surging and often volatile memory-chip stocks, have been blamed for recent stock-market volatility.

They are largely tied to Samsung Electronics and SK Hynix, which together account for about half of the benchmark Kospi's market capitalization.

The Kospi plunged 6.4% on Thursday, re-entering bear-market territory after falling about 27% from its June peak. Despite the selloff, the index is up 62% this year.

At the center of the volatility are Samsung Electronics and SK Hynix, whose shares fell 8.8% and 12%, respectively, on Thursday. Even so, Samsung shares have more than doubled and SK Hynix shares have nearly tripled this year.

The leveraged ETFs are designed to amplify daily moves in the underlying stocks by two times, and some market watchers say that they exacerbate volatility through the daily rebalancing needed to maintain their investment objective.

Herald van der Linde, HSBC's head of equity strategy for Asia Pacific, said in a note Thursday that risks include intensifying retail participation, much of it through newly issued leveraged single-stock ETFs and margin lending, estimated at $23 billion, in South Korea.

Foreign investors' exposure to South Korean memory-chip stocks is rising, likely keeping market volatility elevated and reinforcing the case for diversification, he said.

Write to Kwanwoo Jun at kwanwoo.jun@wsj.com

(END) Dow Jones Newswires

July 16, 2026 05:05 ET (09:05 GMT)