Samsung Electronics and SK Hynix single-stock leveraged exchange-traded funds (ETFs) have absorbed more than 13 trillion won (approximately $8.7 billion) in less than two months since their debut, yet data shows both leveraged and inverse investors have suffered losses. As a flood of retail money fuels criticism that these products are amplifying market volatility, the South Korean government has rolled out supplementary regulations — though doubts about their effectiveness remain widespread.

According to Koscom CHECK data as of July 19, the 16 single-stock leveraged and inverse ETFs tied to Samsung Electronics and SK Hynix have seen total net inflows of 13.41 trillion won (approximately $9.0 billion) since their launch on May 27 through July 16. Seven Samsung Electronics leveraged products attracted 4.72 trillion won (approximately $3.2 billion), while seven SK Hynix leveraged products drew 8.55 trillion won (approximately $5.7 billion). Two inverse ETFs betting on share price declines also pulled in 146.6 billion won (approximately $98.6 million).

By product, the KODEX SK Hynix Single Stock Leveraged ETF topped the list with 5.18 trillion won (approximately $3.5 billion) in inflows, followed by the TIGER SK Hynix Single Stock Leveraged ETF at 3.01 trillion won (approximately $2.0 billion), KODEX Samsung Electronics Single Stock Leveraged ETF at 2.89 trillion won (approximately $1.9 billion), and TIGER Samsung Electronics Single Stock Leveraged ETF at 1.62 trillion won (approximately $1.1 billion).

Despite the massive inflows, returns have been dismal. The KODEX SK Hynix Single Stock Leveraged ETF, which attracted the most capital, plunged 47.5% from 27,775 won (approximately $18.67) at listing to 14,585 won (approximately $9.81) as of July 16 — effectively halving in value. Over the same period, SK Hynix shares fell 17.9%. The KODEX Samsung Electronics Single Stock Leveraged ETF similarly tumbled 41.7% as Samsung Electronics shares dropped 16.9%.

Even inverse products designed to profit when share prices fall failed to avoid losses. The SOL SK Hynix Futures Single Stock Inverse 2X ETF declined 31.1% over the same period, while the PLUS Samsung Electronics Futures Single Stock Inverse 2X ETF fell 8.9%. The inverse ETFs posted negative returns even as the underlying stocks declined.

This is attributed to the “negative compounding effect,” where losses accumulate as the underlying asset price fluctuates. For example, if a stock drops 20% from 100 won to 80 won, then rebounds 25% back to 100 won, a 2x leveraged product on that stock would fall 40% from 100 won to 60 won, then rise 50% to 90 won — resulting in a net loss of 10 won (approximately $0.0067). The recent high-volatility market environment centered on semiconductor stocks has magnified these compounding losses.

The vast majority of inflows came from retail investors. According to South Korea’s Financial Supervisory Service, individuals accounted for 92.7% of single-stock leveraged ETF investors between May 27 and June 12. Koscom CHECK data also shows retail investors made net purchases totaling 14.02 trillion won (approximately $9.4 billion) across the 16 products from launch through July 16.

As concerns mounted that retail money concentrating in single-stock leveraged ETFs was amplifying market volatility, the government announced on July 16 a package of supplementary measures: raising the base deposit requirement from 10 million won (approximately $6,723) to 30 million won (approximately $20,169), accepting only cash deposits, expanding the minimum trading unit from 1 share to 20 shares, and increasing mandatory pre-investment education hours.

However, market observers note that while these measures may partially block entry by new small-scale investors, their effect on reducing market volatility will likely be limited. Unless the overall scale of leveraged trading itself shrinks, the impact on volatility mitigation will be minimal, they argue. In fact, an online stock community survey conducted immediately after the government’s announcement found that 84% of respondents — 5,627 out of 6,696 — said the measures would be “ineffective.”

“From the perspective of investors already engaged in single-stock leveraged trading, the difference between a 10 million won and 30 million won deposit requirement may not feel significant,” said an official at one asset management firm. “If the existing investors who have been amplifying market volatility remain in place, the policy impact will be limited.”