South Korean chipmaker leveraged ETFs see $1B in outflows

South Korean retail investors withdrew nearly $1 billion from leveraged exchange-traded funds (ETFs) tied to major chipmakers Samsung Electronics and SK Hynix during August. This massive outflow marks a significant reversal for products that saw rapid growth following their launch in late May.

The downturn follows a period of high volatility in the semiconductor sector. In July, the KOSPI fell approximately 22%, with SK Hynix and Samsung experiencing declines of 35.5% and 21.5%, respectively. These losses were amplified by the daily-reset structure of the leveraged products, which are designed to deliver twice the daily movement of the underlying stocks.

In response to the market volatility and significant retail losses, South Korean regulators have implemented stricter access requirements. The Financial Services Commission now requires new investors in single-stock leveraged products to maintain a minimum of 30 million won in cash, complete expanded education, and participate in simulated trading. These regulatory changes, alongside a halt on new product listings, have contributed to a sharp decline in daily trading turnover for these ETFs.