Exchange-traded funds — commonly known as ETFs — have been a staple of financial markets since the 1990s, offering everyday investors an affordable way to own a collection of stocks and trade them through a standard brokerage account.
A newer and riskier variation, known as leveraged ETFs, has existed for about two decades. These products promise to multiply the daily gains of a target investment — and they are now surging in popularity, especially among investors chasing the artificial intelligence boom and the hardware companies powering it.
A specific type called single-stock leveraged ETFs, which made their U.S. debut in 2022, are now booming across Asia. Investors are using them to amplify bets on South Korean chipmakers Samsung Electronics and SK Hynix — and the enormous money flows are reshaping those markets, intensifying volatility, and drawing scrutiny from regulators.
How Do Leveraged ETFs Actually Work?
These funds use financial instruments called futures or swaps — essentially contracts tied to borrowed money — to magnify the daily return of a target stock or index. Depending on the product, that multiplier can be two, three, or even five times the daily move. That means bigger gains when prices rise, but equally bigger losses when they fall.
Single-stock leveraged ETFs launched in South Korea in May, while two-times leveraged funds tracking both Samsung and SK Hynix were listed in Hong Kong in 2025 and have seen dramatic growth. The fund tracking SK Hynix alone has grown 20 times in assets since the beginning of the year.
When investors purchase shares in these funds, the fund must buy shares in the underlying stock plus derivatives to achieve the leverage. If the stock rises, the fund buys more. If it falls, the fund must sell. This daily rebalancing creates a feedback loop that amplifies price swings in both directions.
Who Is Buying These Products?
The firms selling these ETFs market them toward professional traders and experienced investors. Many products carry prominent disclaimers warning that they are not appropriate for long-term, buy-and-hold investors.
The ongoing cost of maintaining a leveraged position chips away at returns over time, causing these funds to often drift significantly from the performance of the investments they track. Despite those warnings, large numbers of everyday retail investors have jumped in, eager to capture the upside gains.
What Is Happening in South Korea?
In South Korea, the situation is especially intense. Samsung Electronics and SK Hynix each carry trillion-dollar market valuations and together make up more than half of the benchmark KOSPI stock index.
The combination is “creating an incredible feedback loop that’s driving volatility in the semiconductor space,” said Michael Green, chief strategist and portfolio manager for Simplify Asset Management. “That’s driving elevated levels of volatility on a single-stock level.”
The Hong Kong-listed two-times leveraged ETF tracking SK Hynix, offered by fund manager CSOP, has grown into the largest fund of its kind in the world, with HK$51.8 billion — roughly $6.6 billion — in assets under management.
The massive inflows helped push SK Hynix’s stock price sharply higher, but the daily rebalancing activity at the open and close of trading has since triggered dramatic price swings in both SK Hynix shares and the broader KOSPI index.
On some days this year, Samsung and SK Hynix together have accounted for more than 80% of all trading volume on the KOSPI, according to Reuters calculations.
The KOSPI’s volatility index stood at 89 on Thursday, well above the 28.85 reading at the end of 2025, and just below the record high of 97.99 reached on June 29. SK Hynix’s debut on the Nasdaq this month has added yet another layer of volatility, with a wave of new leveraged ETF products launching in the U.S. market.
What Are Regulators Doing About It?
South Korea’s top financial regulator, the Financial Services Commission, announced a set of new restrictions on Thursday targeting single-stock leveraged ETFs. The measures include a ban on promotional events and guidance discouraging new fund launches.
Last month, another market watchdog — the Financial Supervisory Service — issued an unusually candid admission, acknowledging that approvals for these funds had been “prepared hastily” as part of a broader effort to draw retail investors back from U.S. markets and slow a weakening of the South Korean won.
