[Edaily Reporter Kim Kyung-eun] The concentration of funds into single-stock leveraged exchange-traded funds (ETFs), which were launched on the 27th of last month, is being cited as the cause of the recent sharp volatility in the domestic stock market.
According to the financial investment industry on the 11th, just two weeks after 16 single-stock leveraged ETFs for #SamsungElectronics and #SKHynix were simultaneously launched on the 27th of last month (as of the 10th), the market capitalization of the Samsung Electronics leveraged ETF has swelled to 4 trillion won, while that of the SK Hynix leveraged ETF has reached 5.4 trillion won. During the same period, cumulative net inflows alone reached 2 trillion won for Samsung Electronics and 2.8 trillion won for SK Hynix.

Single-stock leveraged ETFs track returns of ±2x by simultaneously holding both spot stocks and stock futures. According to Samsung Securities, as of the 10th, the Samsung Electronics leveraged ETF holds 3.7 trillion won in spot stocks and 4.1 trillion won in futures, while the SK Hynix leveraged ETF holds 4.8 trillion won in spot stocks and 5.9 trillion won in futures.
The problem, according to securities industry analysts, is that this explosive growth to 10 trillion won in a short period has caused price distortions in the derivatives market and ultimately led to increased index volatility.
During the sharp market decline on the 8th, financial investment firms (including asset managers) among institutional investors recorded net sales of 2.5 trillion won; this is explained as the result of reduced leveraged ETF positions and the resulting inflow of carry trades.
Arbitrage trading refers to a risk-free transaction in which one sells the spot asset and buys the futures contract when the futures are relatively cheap and the spot is expensive, profiting from the price difference. It is explained that the futures contracts for Samsung Electronics and SK Hynix—which had been excessively overvalued due to capital concentration—experienced a price reversal as positions were rapidly reduced during the market plunge, which in turn induced arbitrage trading (selling spot shares and buying futures) and added downward pressure on the index.
In fact, following the launch of leveraged ETFs, Samsung Electronics’ trading volume at the market close increased from an average of 2.39 million shares before the launch to 3.11 million shares, while SK Hynix’s volume rose from 430,000 shares to 720,000 shares. This is interpreted as a result of concentrated rebalancing trades immediately before the closing price.
As funds rushed in rapidly in the short term, sharp price discrepancies emerged even within individual products. On that day, while Samsung Electronics’ stock price fell 7.9%, the leveraged ETFs from Samsung Asset Management and Mirae Asset Management plummeted 20.7%. Similarly, while SK Hynix’s stock price dropped 4.4%, its leveraged ETFs fell by 15% to 17%, showing a fourfold greater decline and a sharp divergence.
Given that these products are still in their early stages, experts predicted that the price anomalies and market shocks associated with leveraged ETFs would gradually subside. However, some have pointed out that institutional measures are needed to mitigate market shocks during the launch of similar products in the future.
Previously, the Financial Services Commission convened asset management firms and relevant agencies to assess investor risks after trillions of won poured into the single-stock 2x leveraged ETF market in a short period.
Kim Ji-hyun, an analyst at Daol Investment & Securities, stated, “The overvaluation of Samsung Electronics and SK Hynix futures has sharply narrowed due to the impact of leverage ETF rebalancing,” adding, “As the market normalizes—including the normalization of excessively high demand for leverage ETF subscriptions, the correction of overvalued stock futures, and the unwinding of arbitrage positions—market volatility is expected to decrease going forward.”
Lim Eun-hye, a researcher at Samsung Securities, also predicted, “As asset sizes grow and stock price volatility stabilizes, the impact on the market will diminish compared to the initial listing phase, and the market will adapt to single-stock leverage and inverse products.”