Full Breakdown
South Korean Retail Investors Face Billions in Losses After Leveraged Chip ETFs Collapse
7/29/2026, 7:53:42 PM
The Collapse of Leveraged Chip ETFs
South Korea’s finance ministry announced on Tuesday that Finance Minister Koo Yun-cheol would seek a trade pact with the United States, but the same day he issued a rare public apology for the fallout from single-stock leveraged exchange-traded funds (ETFs). Introduced on May 27, the products promised twice-daily returns on semiconductor giants Samsung Electronics and SK Hynix. Within weeks, the KODEX SK Hynix Single Stock Leveraged ETF fell more than 80 % from its June 23 peak, while its Samsung counterpart dropped almost 75 % from June 3. The correction in the KOSPI left hundreds of thousands of Korean households with severe unrealized losses.
Background & Context
In January 2026 regulators raised the allowable leverage on certain equity products from 2 × to 3 ×, arguing the move would stem capital outflows and support domestic “self-sufficiency” in semiconductors. The policy coincided with a surge of retail buying in AI-related chips, turning the leveraged ETFs into a “perfect storm” for non-professional investors.
Data & Statistics
- Net purchases of leveraged ETFs by Korean retail investors reached 14 trillion won (? $9.7 bn), versus roughly 2 trillion won by foreign investors.
- Citi strategist Mohammed Apabhai estimated total retail losses at about $38.7 bn (? 56.3 trillion won).
- Market capitalisation of leveraged-ETF products peaked at $52.5 bn (? 76.37 trillion won) and fell to $19 bn (? 27.64 trillion won).
- SK Hynix-linked leveraged ETFs lost roughly $17 bn; Samsung-linked funds shed more than $5 bn; KOSPI200-linked funds declined about $10.5 bn.
- Margin-loan balances in the KOSPI and KOSDAQ markets stood at 32.7 trillion won, down from a peak of 38 trillion won.
Official Statements & Responses
- President Lee Jae Myung called for follow-up measures, while policy chief Kim Yong-beom said the recent instruction did not signal a new policy package.
- The Financial Services Commission (FSC) announced a review of leverage limits, possible caps on individual exposure, and an increase in the minimum retail deposit from 10 million won to 30 million won.
On-the-Ground Reports
- Kim, a 45-year-old office worker, invested 7 million won, averaged down to 34 million won, and now faces unrealized losses exceeding 50 %.
- Choi, a 25-year-old university student, used 8 million won of savings and a loan to buy more ETFs; only about half of his principal remains.
Conflicting Reports & Gaps
Citi’s loss estimate of 56.3 trillion won contrasts with other sources that cite “devastating losses” without a precise figure. No official government total has been released, leaving the full scale of retail damage uncertain.
Why It Matters
The episode underscores the “Korea discount”—the valuation gap between Korean equities and global peers—by highlighting regulatory unpredictability and heightened risk premiums. It also raises questions about the credibility of rapid policy shifts in a market already noted for concentrated index exposure and strong speculative demand from retail investors.
Verbatim Quotes
- “Retail investors have not yet engaged in panic selling,” — Mohammed Apabhai, Head of Asia Pacific Trading Strategy at Citigroup Global Markets Securities
- “The leveraged ETF episode also highlights the regulatory challenge of adapting market-structure rules quickly enough to novel speculative products,” — Yan Wang, chief emerging markets strategist at Alpine Macro
