South Korea Semiconductor Rout Sparks Losses in Leveraged ETFs; Bank Stocks Rally 7.21% in July

According to Economist, in July, a sharp decline in semiconductor stocks triggered substantial losses in single-stock leveraged ETFs, prompting retail investors to seek alternative sectors. South Korea's KOSPI fell over 20% in the month, with Samsung Electronics and SK Hynix comprising an outsized share of the index, amplifying market volatility. Leveraged products tracking these stocks at roughly 2x daily returns amplified losses through negative compounding effects.

Banking stocks emerged as the primary alternative, with the KRX Banking Index surging 7.21% in July—the strongest performance among major sector indices. The top five financial holding companies reported combined net profits of 6.92 trillion Korean won for the second quarter, up 9.6% year-over-year and marking a record quarterly result. Meanwhile, regulators raised minimum deposit requirements for leveraged products from 10 million to 30 million Korean won (cash) effective July 31, and suspended new single-stock leveraged ETF listings to curb retail risk exposure.