Assets in single-stock ETFs tied to Samsung and SK Hynix cut in half

South Korea’s experiment with single-stock leveraged ETFs has gone about as well as handing a toddler a flamethrower. Products tracking Samsung Electronics and SK Hynix, the country’s two semiconductor titans, have seen their assets under management collapse by roughly 50% from peak levels, leaving a trail of retail losses and regulatory scrambling in their wake.

The funds, which launched on May 27 on the Korea Exchange, attracted an astonishing 14 to 15 trillion won (around $9.4 to $10.4 billion) in net inflows from retail investors in the weeks following debut.

From moon to crater in sixty days

Sixteen single-stock ETFs, primarily offering 2x daily leveraged exposure to Samsung and SK Hynix, hit the market and immediately drew a tidal wave of retail money. Combined AUM peaked at roughly 17 trillion won, approximately $11 to $12 billion.

The largest product, the KODEX SK Hynix Single Stock Leverage fund, peaked at around $3.4 billion in AUM before tumbling approximately 45% from its debut price. Multiple products across the lineup fell even harder, with share prices dropping from around 20,000 won at listing to below 10,000 won by late July.

The culprit was straightforward: the underlying semiconductor stocks themselves declined sharply. Investor sentiment shifted as concerns mounted over the sustainability of AI-driven demand, the same narrative that had propelled the chipmakers to premium valuations in the first place. When Samsung and SK Hynix suffered record single-day losses, the leveraged ETFs did what leveraged ETFs do. They made a bad situation twice as bad.

Regulators hit the brakes

South Korean financial authorities moved quickly once the scale of retail losses became apparent. By late July, regulators had introduced a package of measures that collectively amounted to a cold shower for the leveraged ETF market.

The minimum deposit requirement was raised to 30 million won, a significant barrier for smaller retail traders. Cash-only purchases were prohibited, an advertising ban was imposed, and new product launches were halted entirely.

The impact was immediate. Roughly 1.77 trillion won in net selling occurred between late July and late August, as investors either cut their losses or were effectively priced out of the market by the new deposit requirements. Trading volumes dropped sharply alongside the outflows.

The Bank of Korea weighed in with concerns about amplified market volatility, while major politicians flagged the concentration risks inherent in having so much retail capital tied to just two companies.

The mechanics of the meltdown

Understanding why these products inflicted such damage requires a brief detour into how leveraged ETFs actually work. A 2x daily leveraged ETF aims to deliver twice the daily return of its underlying stock. On a single day, that math is clean. Over multiple days, compounding effects can create a significant divergence between the ETF’s performance and a simple 2x multiple of the stock’s total return.

Think of it like this: if a stock falls 10% one day and rises 10% the next, it doesn’t return to its starting price. It ends up at 99% of where it began. A 2x leveraged product amplifies that gap. Over weeks of volatile trading, the erosion compounds relentlessly. This phenomenon, sometimes called volatility decay, is well-documented in financial literature but poorly understood by most retail investors.

The South Korean case was particularly acute because the underlying stocks weren’t just drifting. They were experiencing sharp, directional moves driven by a rapid repricing of AI-related semiconductor demand. For investors who bought in near the peak and held through the downturn, the combination of leverage and adverse price action was devastating.