South Korean Retail Investors Lost $1.7 Billion in Leveraged Chipmaker ETFs

The leveraged single-stock ETFs and notes, launched in May, were linked directly to the two semiconductor giants that form a core part of South Korea’s AI-driven stock market. Their introduction intensified market volatility, contributing to sharp swings as leveraged bets amplified both gains and losses. Regulators noted the products had made Korea’s market one of the world’s top performers before the downturn triggered significant retail losses.

In response, authorities imposed a temporary ban on new listings of such leveraged products starting in July, alongside stricter rules including higher minimum cash deposits and mandatory investor training. These measures marked a reversal from the initial launch, which had aimed to divert local investment from similar overseas-listed ETFs.

The Financial Supervisory Service emphasized that while leveraged products are designed to magnify returns, they also expose investors to amplified losses during market reversals — particularly in sectors like semiconductors, where earnings are highly cyclical and tied to global AI demand. Trading activity in these products has since declined sharply following regulatory intervention.