The South Korean stock market's leverage trade is rising rapidly. The Kobeissi Letter data show that Korean leverage ETF asset management has risen to about $45 billion, a record high of about 800 per cent over the early 2026. At the same time, the corresponding leverage exposure for such products increased to 2.9 per cent of the market value of the Republic of Korea, more than three times higher than at the beginning of the year.
Since May, Korean diasporas have accumulated net purchases of about 62 trillion won. Continued capital flows to highly leveraged products are changing the market liquidity structure and making the stock market more sensitive to information and emotional fluctuations.
Half-conductor plate takes most of the money away.
Semiconductor is the most concentrated block of this round. The SK Hercules-based leverage ETF was once about $15 billion in size and became one of the largest single equity leverages in the world. By contrast, the US share of major technology units is two times more associated with ETFs, usually less than $10 billion in size, and the Korean market is more concentrated.
Korea's regulatory authorities have previously eased the issuance restrictions for single-stock leverage ETFs and allowed the launch of related products, targeted at three-star electronics and SK Hercules. Although regulation has set a 2-fold leverage ceiling and limited the number of products that can be issued by a single agency, the first products have quickly attracted significant financial resources.
KOSPI increased by 60% during the year
Driven by the warming of the AI concept and by the inflow of foreign investment, Korea’s KOSPI index has increased by more than 60 per cent in the year, and has been refreshing its highs on several occasions. The continued strength of the index has further boosted investors ' demand for leverage products.
But in a highly leveraged environment, markets are also more responsive to policy changes. Previous discussions around AI corporate taxation have triggered a single-day drop of more than 7 per cent in the Korean ETF product EWY, and have spread to global chips, suggesting that local policy expectations may also be rapidly magnified.
Special conferences have been held by the regulatory authorities
With the rapid expansion of the leverage ETF, the Korea Financial Regulatory Authority has convened a dedicated meeting on associated risks and has warned that the expansion of high-risk products may decentralize large market fluctuations in pressure scenarios.
At present, the Republic of Korea leverage ETF size, bulk net buy-in and semiconductor plate concentration are high. The continued inflow of funds has been accompanied by increased market interest in liquidity and volatility risks.