Since their listing on South Korea’s stock market in late May, single-stock leveraged ETFs for Samsung Electronics and SK Hynix have reshaped the country’s equity landscape in just over a month. Amid intense market interest, trading volumes and market capitalizations have surged explosively, yet investor returns have cratered due to the negative compounding effect.

The flagship product, Samsung Asset Management’s “KODEX SK Hynix Single-Stock Leveraged ETF,” has seen its market capitalization exceed ₩5.1 trillion (approximately $3.3 billion). Only 105 stocks on the KOSPI market and 11 on the KOSDAQ are larger, underscoring its overwhelming scale. The combined market cap of SK Hynix leveraged products listed in South Korea totals approximately ₩9 trillion (approximately $5.9 billion), far surpassing the roughly ₩6 trillion (approximately $3.9 billion) market cap of NVDL, the well-known Nvidia leveraged ETF in the U.S. market. Given that Nvidia’s market cap is more than four times that of SK Hynix, this serves as evidence that South Korea’s leveraged investment fervor is uniquely intense.

The trading volumes are even more staggering. According to the Korea Exchange, over the five trading sessions from June 29 to July 3, the 14 Samsung Electronics and SK Hynix single-stock leveraged ETFs generated a combined trading value of ₩50.55 trillion (approximately $33.0 billion). This represents approximately 23.8% of the total KOSPI trading value of ₩211.92 trillion (approximately $138.5 billion) during the same period. On an individual product basis, the “KODEX SK Hynix Single-Stock Leveraged ETF” accounted for ₩23.64 trillion (approximately $15.4 billion), or 11.1% of total KOSPI trading. It was followed by Mirae Asset Global Investments’ “TIGER SK Hynix Single-Stock Leveraged ETF” (₩12.47 trillion), “KODEX Samsung Electronics Single-Stock Leveraged ETF” (₩8.85 trillion), and “TIGER Samsung Electronics Single-Stock Leveraged ETF” (₩4.64 trillion).

Retail investors aggressively bought these products during this period. Cumulative net retail purchases were largest for the “KODEX SK Hynix Single-Stock Leveraged ETF” at ₩930.9 billion (approximately $608.3 million), followed by the “KODEX Samsung Electronics Single-Stock Leveraged ETF” at ₩464.2 billion (approximately $303.3 million), “TIGER SK Hynix Single-Stock Leveraged ETF” at ₩417 billion (approximately $272.5 million), and “TIGER Samsung Electronics Single-Stock Leveraged ETF” at ₩240.1 billion (approximately $156.9 million).

However, contrary to expectations, returns have been dismal. According to ETF information platform FunETF, the net asset value (NAV)-based return of the “KODEX SK Hynix Single-Stock Leveraged ETF” from June 29 to July 2 reached -33.53%. The “TIGER SK Hynix Single-Stock Leveraged ETF” posted -33.47%, while the “KODEX Samsung Electronics Single-Stock Leveraged ETF” recorded -23.58% and the “TIGER Samsung Electronics Single-Stock Leveraged ETF” -23.69%. During the same period, Samsung Electronics shares fell 11.45% and SK Hynix dropped 16.78%, but the leveraged products’ declines far exceeded these moves.

A bigger problem is the long-term divergence between the direction of the underlying stocks and leveraged ETF returns. From listing through July 3, Samsung Electronics rose 0.81%, yet the “KODEX Samsung Electronics Single-Stock Leveraged ETF” fell 10.75%. SK Hynix surged 8.11%, but the “KODEX SK Hynix Single-Stock Leveraged ETF” declined 1.35%. Structurally, if the underlying stock rises 0.81%, a leveraged ETF should gain 1.62%, but the negative compounding effect—where cumulative returns are eroded as prices fluctuate—exerted a powerful drag.

Jeon Kyun, a researcher at Samsung Securities, analyzed: “Looking at the hourly trading volume distribution of the stocks, volumes increased significantly in the latter part of the session, especially near the close, compared to before the listings. This is the result of rebalancing volumes from leveraged products combined with shorter-term trading driven by sharp price swings.” Indeed, SK Hynix’s trading volume at the market close surged 65%, from a pre-listing daily average of 390,000 shares to 650,000 shares afterward.

The phenomenon of leveraged ETFs amplifying market volatility has also become pronounced. Since May 27, sidecar mechanisms have been triggered 13 times on the KOSPI. Of the 31 sidecar activations this year, roughly half have occurred since the single-stock leveraged products were listed. This effect is magnified during sharp sell-offs led by foreign investor spot selling. A pattern has emerged where foreign-led selling drives declines, leveraged ETFs amplify the move, and then large-scale futures buying near the close aims to capture profits when the market normalizes the following day.

The concentration of retail investor funds is also intensifying. As recently as April, retail investors were net buyers of ₩3 trillion (approximately $2.0 billion) on the KOSDAQ, but after the single-stock leveraged ETF listings, they flipped to net sellers of ₩2.8 trillion (approximately $1.8 billion). The sheer scale of leveraged ETF purchases has paradoxically prevented buying momentum from spreading to other stocks and instead spurred selling.

Asset management firms advised at launch that these products should be held for no more than a week and only for short-term trading, but reality has proven the opposite. An analysis of customer accounts by Korea Investment & Securities found that the average holding period for single-stock leveraged ETFs reached 15 to 17 days. Considering the products have only been listed for about 37 days, this suggests many investors are betting on the semiconductor cycle and holding on, rather than day-trading. As share prices fell, investors who failed to cut losses were forced into longer holding periods, falling into a vicious cycle of mounting losses.

Notably, investors with smaller portfolios showed a clear tendency to concentrate their investments in leveraged products. According to Korea Investment & Securities, among investors in the “KODEX SK Hynix Single-Stock Leveraged ETF,” those with stock holdings below ₩30 million (approximately $19,600) allocated 21% of their assets to the product, while those with holdings above ₩1 billion (approximately $653,000) invested only 9%. This is interpreted as retail demand flooding into leveraged ETFs—which have relatively low barriers to entry—as securities firms’ credit extension limits have been maxed out amid the market boom, making new margin trading difficult.

Despite all this, retail investor interest in single-stock leveraged ETFs shows no signs of cooling. Market watchers believe that as long as Big Tech continues to expand AI investments, the earnings outlook for memory semiconductor-focused companies like Samsung Electronics and SK Hynix remains bright. Net assets in semiconductor-themed ETFs are also steadily growing. Samsung Asset Management’s “KODEX AI Semiconductor TOP2 Plus” ETF recorded net assets of ₩5.29 trillion (approximately $3.5 billion), while Korea Investment Management’s “ACE K Semiconductor TOP2+” ETF has seen cumulative net retail purchases surpass ₩200 billion (approximately $130.7 million) since listing.

Meanwhile, amid the turbulence in South Korea’s stock market, funds have also flowed steadily into ETFs based on major U.S. equity indices. Mirae Asset Global Investments’ “TIGER US S&P 500” ETF surpassed ₩20 trillion (approximately $13.1 billion) in net assets, setting a record for the shortest time to reach that milestone among ETFs listed in South Korea.