South Korean lawmaker calls for delisting of Samsung, SK Hynix leveraged ETFs, says KOSPI 'has become a casino'

BlockBeats News, July 6 — Regulatory controversy over single-stock leveraged ETFs in South Korea continues to heat up. Rep. Ahn Cheol-soo, of the People Power Party and a former presidential candidate, has publicly called for strong measures—including delisting—against single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix, and said that South Korea’s Korea Composite Stock Price Index (KOSPI) “has already turned into a casino.”

Ahn Cheol-soo said that the amount of funds flowing into leveraged ETFs for Samsung Electronics and SK Hynix has reached 212 trillion Korean won. The two companies together account for about 60% of the total market capitalization of KOSPI. The combination of high-weight stocks and leveraged fund inflows amplifies market volatility. Since the beginning of this year, South Korea’s stock market has triggered the “sidecar mechanism” (a programmed trading halt) 31 times. The circuit breaker mechanism has been activated 5 times, and the KOSPI panic index once rose to a record high of 90.8.

At the end of May this year, South Korea launched its first batch of domestic single-stock 2x leveraged ETFs, aiming to attract high-risk trading demand back into the domestic market. However, after the products were listed, they experienced sharp price deviations due to daily rebalancing mechanisms and liquidity issues. In early June, a leveraged ETF tracking SK Hynix surged by about 50% in a single day, while the underlying stock fell by nearly 8% over the same period. In the secondary market, the fund’s price at one point traded at a premium of up to 86% over its net asset value; then, the premium disappeared quickly the next day, and the ETF instead plunged by about 27%.

As market volatility intensifies, South Korea’s central bank and financial regulators have recently issued more cautious regulatory signals. The Bank of Korea warned that the continued expansion of single-stock leveraged ETFs could further increase market concentration, worsen market volatility, and magnify the risk of losses for retail investors. The National Assembly of South Korea has now launched a review of this type of product, discussing further tightening of regulatory measures and even pushing for the delisting of related products.