Korea's stock market leverage out of control: $45 billion in funds surging, SK Hynix's single ETF scale overwhelms US tech giants.

The degree of leverage in the Korean stock market is heading to extremes at an unprecedented pace. The rapid expansion of leveraged ETF sizes is reshaping the market’s capital structure and pushing systemic risk to record highs.

According to the latest data from The Kobeissi Letter, the assets under management (AUM) of Korean leveraged ETFs have risen to an all-time high of approximately $45 billion, up about 800% from the beginning of 2026. Meanwhile, the share of leveraged exposure relative to Korea’s free-float market capitalization has reached a record 2.9%, more than tripling versus the start of the year, indicating that leveraged capital’s penetration into market liquidity has deepened significantly.

Under the combined effects of regulatory easing and capital chasing returns, the Korean market is exhibiting a globally rare preference for high leverage. Retail capital continues to pour in; since May, cumulative net buying has reached 62 trillion Korean won, further magnifying the leveraged ETF expansion and the market’s sensitivity to volatility.

SK Hynix Leveraged ETF Size Leads Globally; High Leverage Magnifies Market Sensitivity

The semiconductor sector has become the core focus of concentrated capital bets. In single-stock leveraged ETFs tied to one stock, SK Hynix-related products once reached a size of about $15 billion, becoming the largest comparable product in the world. By contrast, in the U.S. stock market, the size of 2x leveraged ETFs tied to major technology stocks usually does not exceed $10 billion—showing that the Korean market has significantly higher concentration and a higher degree of leverage.

This phenomenon is closely linked to policy changes approved by Korea’s financial regulators regarding single-stock leveraged ETFs. Although a 2x leverage limit and restrictions on the number of products per firm have been set, the first batch of ETFs based on Samsung Electronics and SK Hynix still quickly attracted large inflows of capital, creating a clear capital-siphoning effect.

Driven by AI market momentum and inflows of foreign capital, Korea’s KOSPI index has risen more than 60% year-to-date and has repeatedly set record highs during intraday trading. But at the same time, the market’s sensitivity to policy and sentiment changes has clearly increased. For example, earlier discussions about taxing AI companies triggered a drop of more than 7% in an ETF (EWY) in a single day, which then spilled over into the global chip sector—highlighting the amplification effect in a high-leverage environment.

Korea’s financial regulators have held a special meeting on leveraged ETF risks and warned that, amid the expansion of high-risk products, the market may see even more violent fluctuations in stress scenarios. With $45 billion in leveraged capital continuing to accumulate, structural liquidity risks in the market are gradually rising.

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