South Korea is launching its first single-stock leveraged ETFs this week, targeting Samsung Electronics and SK Hynix chipmakers. According to reports from Bloomberg, these products will seek to deliver twice the daily moves of the two stocks, both central to the global artificial intelligence trade. The launch represents a significant development in Korea's financial markets, as the country has previously barred such high-risk products over concerns about their volatile nature. On the 27th, 16 single-stock leveraged and inverse ETFs based on companies such as Samsung Electronics (005930.KS) and SK Hynix (000660.KS) will be simultaneously listed in Korea for the first time, as reported by Naver Finance.
A blistering rally in Samsung Electronics Co. and SK Hynix Inc. has created unexpected challenges for funds bound by regulatory constraints. Global investors sold a net $63.6 billion of local equities over the past year, marking the biggest monthly outflow since data became available in 1999. Samsung and SK Hynix saw $58.6 billion worth of net outflows combined this year, as funds hit position limits despite remaining bullish on the stocks. According to Goldman Sachs Group Inc., diversification rules have triggered roughly $69 billion of selling since late October, as Korea-focused funds overseeing nearly $200 billion contend with the growth of the two chipmakers' combined weighting. Over the past year, SK Hynix has gained over 1,000% while Samsung has jumped more than 400%, significantly outpacing Taiwan Semiconductor Manufacturing Co.'s 137% rise.
South Korean brokerages forecast the KOSPI will attempt to settle above 8,000 this week, driven by renewed earnings momentum and valuation appeal. According to an analysis released by NH Investment & Securities on the 24th, the KOSPI is projected to fluctuate between 7,200 and 8,500 this week (May 26-29). Last Friday, the KOSPI closed at 7,847.71, up 32.12 points (0.41%) from the previous trading day, while the Kosdaq jumped 4.99% on the same day. As reported by NH Investment & Securities, when the KOSPI fell to as low as 7,053 points intraday on the 19th, the forward price-to-earnings ratio (PER) stood at 7.8 times, a historically low level. Analysts expect the second-quarter earnings season to shift market attention from macro uncertainty to fundamentals, with earnings momentum expected to drive upward momentum.
Korean investors have demonstrated exceptional appetite for leveraged products in recent years, seeking to capitalize on the global AI boom that propelled the Kospi benchmark more than tripling since the end of 2024. As reported by Bloomberg, Hong Kong-listed two-times leveraged products tied to Samsung's shares have attracted approximately $1.3 billion in year-to-date inflows. A similar leveraged fund linked to SK Hynix has drawn roughly the same amount and has become the world's largest single-stock leveraged ETF. Analysts estimate that net inflows into 14 leveraged ETFs tied to Samsung and SK Hynix could reach as much as 5.3 trillion won ($3.5 billion). Around 300,000 investors completed the mandatory training required for leveraged ETF investing during the first two months of this year, exceeding the total recorded in 2025. On May 22, foreign investors net bought about 600 billion won on the Kosdaq, while institutions net bought 290 billion won.
Korea imposes a 10% single-stock cap on public equity funds, though Samsung and SK Hynix are exempt, allowing portfolio managers to hold the two stocks up to their market weights of 27.05% and 15.71% respectively. However, funds bound by these rules have increasingly hit position limits as the chipmakers touch daily highs. Jupiter Asset Management in Singapore and GAM Investment Management in Zurich are among those forced to reshuffle portfolios to stay compliant. As reported by Moneycontrol, some firms have turned to proxy plays, with SK Square Co. holding a 20.5% stake in SK Hynix skyrocketing more than 1,000% over the past year, while Samsung Life Insurance Co. with an 8.58% stake more than tripled in the same period. Despite regulatory constraints, analysts expect Korea may see fresh inflows from global fund managers attracted to Korean and Taiwanese tech companies.
