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A sharp plunge in South Korea’s stock market has prompted investors to re-examine the $290 billion leveraged ETF frenzy

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Amid AI-driven sell-offs in South Korea’s stock market, attention has refocused on one of the fastest-growing areas for retail investors: leveraged exchange-traded funds (ETFs). These products have long been a go-to tool for day traders, but this week, the share prices of Samsung Electronics and SK Hynix saw violent swings, and South Korea’s top market regulator expressed regret over allowing the issuance of single-stock leveraged ETFs—prompting investors to reassess whether these ETFs are intensifying market volatility. The issue became even more urgent on Tuesday, when the Korea benchmark Kospi index plunged 10%, triggering a sell-off in global semiconductor stocks and dragging down European and U.S. stock indexes. While few investors attribute this drop to leveraged ETFs, strategists are increasingly viewing them as part of a speculative mechanism: once momentum shifts, leveraged ETFs magnify market volatility. As leveraged ETF products reach unprecedented scale, market focus on them has also heated up. Data shows that the assets under management of leveraged ETFs have currently exceeded $290 billion, with the Asian market accounting for more than $45 billion and the U.S. market for more than $220 billion. Alexander Altmann of Barclays Stock Tactics estimates that over the past 10 trading days, the rebalancing of U.S. leveraged ETFs averaged about $20 billion per day—roughly four times the level of the past year.
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