Despite South Korea’s KOSPI Volatility Index (VKOSPI) surging into what market watchers call an “uncontrollable panic phase,” individual investors are stampeding into single-stock leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK Hynix. Over the past month, trading volume for leveraged ETFs linked to these two stocks reached 212 trillion won (approximately $138.5 billion), and they claimed the top two spots for net inflows in the most recent week.
According to data from the Korea Exchange and Koscom ETF Check on July 3, the product attracting the most capital across the entire South Korean ETF market over the past week (five trading days) was the KODEX SK Hynix Single Stock Leveraged ETF. The fund saw net inflows of 787.8 billion won (approximately $514.6 million) during this period. It was closely followed by the KODEX Samsung Electronics Single Stock Leveraged ETF, which absorbed 617.5 billion won (approximately $403.4 million) to rank second in net inflows.
This concentration of capital is not a short-term phenomenon. During the month of June, total trading volume across 14 single-stock leveraged ETFs (excluding inverse products) with Samsung Electronics and SK Hynix as underlying assets reached 212 trillion won. That figure represents approximately 26.6% of the total ETF trading volume of 797 trillion won (approximately $520.7 billion) over the same period. Notably, the KODEX SK Hynix Single Stock Leveraged ETF alone recorded monthly trading volume of 84.03 trillion won (approximately $54.9 billion), ranking first among all ETFs in June. It was followed by the KODEX Samsung Electronics Single Stock Leveraged ETF (47.88 trillion won), TIGER SK Hynix Single Stock Leveraged ETF (46.25 trillion won), and TIGER Samsung Electronics Single Stock Leveraged ETF (29.03 trillion won), all of which placed among the top 10 by trading volume.
However, contrary to the aggressive bets placed by these so-called “fire ants” — a nickname for South Korea’s fervent retail investors — actual returns have fallen significantly short of expectations. In June, SK Hynix single-stock leveraged ETFs delivered returns of only 12% to 15%, while Samsung Electronics single-stock leveraged ETFs hovered around 0% to 0.5%. Some futures-based leveraged products even posted slight negative returns.
Moreover, the recent U.S.-driven semiconductor shock and subsequent stock price plunge have further magnified losses in these products. Looking at cumulative returns since their May 27 listing through July 2, the KIWOOM Samsung Electronics Futures Single Stock Leveraged ETF has tumbled 20.9%, while the KODEX Samsung Electronics Single Stock Leveraged ETF has plunged 18.7%. SK Hynix-related products have also inflicted heavy losses on investors, with the KIWOOM SK Hynix Futures Single Stock Leveraged ETF down 12.9% and the KODEX SK Hynix Single Stock Leveraged ETF down 6.0%.
Reflecting the extreme volatility in the market, the VKOSPI surged to 89.29 at the close on July 3. The VKOSPI is an index that gauges the anxiety and fear sentiment felt by investors, with readings in the 70-80 range signaling an “uncontrollable panic phase” where even government stimulus measures prove ineffective. The fact that retail investors are aggressively buying leveraged products despite such clear warning signals is raising concerns across the market.
In contrast, capital favoring stable asset management is rapidly exiting the ETF market. The product experiencing the largest outflows over the same period was the KODEX 200, which tracks the KOSPI 200 index. Additionally, money market fund (MMF) ETF products, widely classified as representative safe-haven assets, also ranked high on the outflow list. The TIGER Money Market Active ETF saw net outflows of 333.7 billion won (approximately $218.0 million), while the KODEX Money Market Active ETF recorded net outflows of 251.7 billion won (approximately $164.4 million). MMFs are ultra-short-term financial products that pool customers’ idle funds to invest in high-quality short-term bonds for profit, allowing free deposits and withdrawals at any time, making them a quintessential stability-seeking product.
Experts warn that this concentration of capital into single-stock leveraged ETFs could trigger a vicious cycle that further amplifies market volatility. Leveraged ETFs conduct daily rebalancing trades — buying additional shares when prices rise and selling when prices fall — to maintain their target leverage ratio, a process that can exacerbate stock market volatility.
Park Woo-yeol, an analyst at Shinhan Securities, explained: “Single-stock leveraged products have been trading around 10 trillion won (approximately $6.5 billion) daily on average, amplifying index volatility. Before the listing of these leveraged ETFs, the KOSPI 200 Volatility Index averaged 53, having already entered a phase of persistent high volatility, but it now averages 88.9, indicating a state of chronic extreme volatility.” A financial investment industry official also cautioned: “Single-stock leveraged ETFs can see amplified losses during sharp short-term price swings. Investors need to exercise caution.”