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South Korea has cracked down on high-octane retail bets on the country’s biggest chipmakers in a bid to stabilise the nation’s stock market after a dramatic rout.
Following an emergency meeting on Wednesday, Korea’s finance ministry said it would limit access to leveraged exchange traded funds that have grown wildly popular among the country’s retail investors and have been blamed for amplifying moves in indices and individual stocks.
The Kospi index has fallen more than 15 per cent in the past two trading days — and is down by a third so far this month — after a sell-off in chipmakers SK Hynix and Samsung, which have grown to dominate the benchmark as they are swept up by the global AI boom.
Korea’s finance minister, the head of the central bank and financial regulators share concerns that investment in the funds is “amplifying market volatility”, according to the statement.
The ETFs were approved by Korea’s financial regulators only in May but quickly became central to a retail investor boom in Korea by allowing even bigger bets on triple-digit rallies in SK Hynix and Samsung this year.
They have since violently unwound as fears of Chinese competition and weaker demand from US AI companies have hit chipmaker stocks.
The Kospi remains up a third for the year. SK Hynix shares have more than doubled in 2026, despite halving since a June peak.
Including Hong Kong-listed vehicles, leveraged ETFs tracking SK Hynix and Samsung have shed more than two-thirds of their peak assets under management, to below $10bn, according to Société Générale.
“Aggregate AUM has returned to end-May levels, roughly where it stood when the first Korea-domiciled products were launched,” analysts at the bank said.
The new measures will include capping retail investment in single-stock leveraged ETFs as a share of individuals’ portfolios and making it more expensive to trade the funds, the finance ministry said. Korean regulators have already moved to raise deposits for trading the funds from the end of July.
Regulators are also seeking legal authorisation for market stabilisation tools similar to a measure introduced by Hong Kong regulators this month, which will allow ETFs to lower daily leverage during fraught markets.
Heads of Korea’s financial regulators issued apologies in parliamentary hearings earlier on Wednesday as opposition lawmakers attacked the rapid approval of the products this year.
Foreign investors have been big sellers of Korean stocks for months as SK Hynix and Samsung’s intense rally triggered concentration limits in key stock indices.