South Korean Retail Investors Hit Hard by Leveraged ETF Collapse and Regulatory Clampdown

Since the May 27, 2026 launch of single-stock leveraged exchange-traded funds (ETFs) that aim to deliver twice the daily move of Samsung Electronics Co. and SK Hynix Inc., South Korean retail investors have seen their positions plunge. The KODEX SK Hynix Single Stock Leverage ETF fell roughly 70 % from its June record high and is down about 50 % from its debut, according to LSEG data. The broader Kospi index, which had risen above 5,000 earlier in the year, is now about 26 % lower than its June peak, with a single-day drop of 4.5 % on the Monday after a holiday.

CNBC"Return my hard-earned money": Korean retail investors' leveraged bets on SK Hynix and Samsung end in disastrous losses after plungeSouth Korean Retail Investors Wiped Out by Leveraged AI Bets; Single-Stock ETF Plunges 70%, Regulators Slam Brakes — BigGo FinanceBloomberg

The surge in leveraged ETFs coincided with a wave of optimism that positioned South Korea as a key AI-chip supply-chain hub. Memory-chip makers Samsung and SK Hynix rode an AI-driven rally that helped push the Kospi to historic levels. Retail investors, many in their 40s and 50s, accessed these products through smartphone brokerage apps, using high-margin loans to amplify bets.

CNBC

• Retail net purchases of leveraged ETFs: KRW14 trillion (? $9.4 billion); foreign net purchases: KRW2 trillion.

South Korean Retail Investors Wiped Out by Leveraged AI Bets; Single-Stock ETF Plunges 70%, Regulators Slam Brakes — BigGo Finance

• Margin loan balances peaked at KRW38.63 trillion on June 24, then fell to KRW34.37 trillion by July 15.

‘I Couldn’t Breathe’: South Korea’s Retail Investors Pay the Price of Leverage

• Over 1.2 million accounts hit margin-call thresholds; about 360,000 were forcibly liquidated, raising the liquidation rate from an average 2.1 % to over 10 %.

‘I Couldn’t Breathe’: South Korea’s Retail Investors Pay the Price of Leverage

• Assets of the 25 largest leveraged ETFs now represent roughly 30 % of South Korea’s thematic-fund market, up from 15 % at the start of 2026.

South Korean Retail Investors Wiped Out by Leveraged AI Bets; Single-Stock ETF Plunges 70%, Regulators Slam Brakes — BigGo Finance

• Minimum cash margin for leveraged ETFs was raised from KRW3 million (? $20) to KRW30 million (? $202) on July 16.

"Return my hard-earned money": Korean retail investors' leveraged bets on SK Hynix and Samsung end in disastrous losses after plunge

Choi Soung-ah, secretary to President Lee Jae Myung for foreign press affairs, said the government “does not pursue policies aimed at any specific level of the stock market or short-term market movements,” emphasizing a goal to strengthen confidence in capital markets. Peter Kim, head of global investment strategy at KB Financial Group, warned that “there are currently no signs that South Korean retail investors are exiting the market en masse, but if pressure on ETFs persists… it could lead to a prolonged market downturn.” Regulators halted new leveraged-ETF listings on July 16 and announced tighter trading rules, including the ten-fold margin increase.

Bloomberg

A public petition calling for government intervention gathered more than 35,000 signatures, and politicians across the ruling and opposition parties have labeled the leveraged products as “casino-like.” Analysts at Morgan Stanley noted that the three-to-four-week lag before the new rules take effect limits their immediate stabilizing impact and warned that some investors might shift capital offshore to access similar products abroad.

Bloomberg

Sources differ on the pre-change minimum deposit requirement: some cite KRW10 million, others KRW3 million. The precise timeline for the new margin rule’s enforcement also varies, with reports of a three-week versus a four-week lag.

‘I Couldn’t Breathe’: South Korea’s Retail Investors Pay the Price of Leverage

• “For President Lee himself, the challenge is supporting Korea’s AI ambitions while avoiding a retail-driven boom-and-bust cycle,” — Gary Tan, Portfolio Manager, Allspring Global Investments

Bloomberg

• “Semiconductors and memory are the most crowded trade among global institutions and retail investors, and that trade is over,” — Hayes, Chairman and Managing Partner, Great Hill Capital

South Korean Retail Investors Wiped Out by Leveraged AI Bets; Single-Stock ETF Plunges 70%, Regulators Slam Brakes — BigGo Finance

• “I literally could not breathe,” — Lee Seung-ho, former Korean military serviceman, Reuters interview

‘I Couldn’t Breathe’: South Korea’s Retail Investors Pay the Price of Leverage

• “You're determined to kill me,” — Retail investor, online trading forum (quoted in media)

CNBC

• “The investors bearing these losses are overwhelmingly local Korean retail traders.” — Jung In Yun, Founder, Fibonacci Asset Management

"Return my hard-earned money": Korean retail investors' leveraged bets on SK Hynix and Samsung end in disastrous losses after plunge

The raised margin requirement and ban on new leveraged-ETF listings will become effective within the next 3-4 weeks. The Financial Services Commission has signaled that additional measures could follow if market volatility persists, while brokers continue monitoring the concentration of margin balances in the four dominant semiconductor stocks.

‘I Couldn’t Breathe’: South Korea’s Retail Investors Pay the Price of Leverage