About 14% of the turnover in Samsung and SK Hynix on Tuesday, June 23, was attributed to sales by leveraged single-stock ETFs, according to Bloomberg data. These financial instruments are structured to provide twice the daily returns of the chipmakers they track.
Such products have come under scrutiny because of their rebalancing tactics and their growing role in South Korea’s stock market, one of this year’s AI-driven powerhouses. To maintain their fixed leverage ratio, the funds must rebalance daily, forcing them to buy into market rallies and sell into declines.
South Korea’s benchmark KOSPI index recorded its worst selloff since the start of the Iran war as two of its “big three” chipmakers — SK Hynix and Samsung — fell more than 12%. Together, the two stocks account for about 55% of the index.
Rebecca Sin, an ETF analyst at Bloomberg Intelligence in Hong Kong, said the market move was not driven by a recovery in investor sentiment but by selling pressure from leveraged ETFs rebalancing their holdings to restore their daily 2x exposure.
According to Sin, this mechanical adjustment amplified declines in stocks that already make up more than half of the index, adding to the broader market slide. She said net outflows from the $44 billion universe of leveraged ETFs tracking the chipmakers stood at about $1.7 million on Tuesday, June 23, although some products also recorded inflows.
Sin attributed the flows to investors taking profits after the strong rally in SK Hynix and Samsung Electronics this year, while Tuesday’s flows also reflected dip-buying by other investors. She noted that strong flows and sustained investor interest continued across the chip, AI, and technology sectors.
The popularity of leveraged ETFs in Hong Kong has led to the launch of more than a dozen leveraged and inverse ETFs tracking SK Hynix and Samsung. Assets in the Hong Kong-listed CSOP SK Hynix Daily 2x Leveraged Product, the world’s largest product of its kind, stood at about $1.7 billion on Monday, June 22.
A sales desk note from Goldman Sachs stated that the daily mechanical rebalancing requirements of leveraged products can create an impulsive cycle, in which ETFs are forced to sell their underlying assets as net asset values decline.
Leveraged ETFs can significantly amplify market movements. When the underlying stocks fall, these funds may be forced to sell shares to maintain their leverage, which can push stock prices down further and create a feedback loop that intensifies market volatility.
(Edited by : Gautham Krishna)
First Published: Jun 24, 2026 4:17 PM IST