Over 80% Drop! South Korean Finance Minister Apologizes to Retail Investors, Admits Rushing Launch of Single-Stock Leveraged ETFs

If we rewind time to early 2026, the South Korean Composite Index (KOSPI) benefited from the artificial intelligence (AI) boom, showing a straight-line surge in stock prices driven by the country's two major memory chipmakers. On May 27, Seoul authorities capitalized on this momentum by approving the listing of 'single-stock leveraged ETFs,' which immediately attracted a flood of South Korean retail investors using leverage to pour in capital, hoping to profit from the bullish trend.

However, reality was far less favorable. This speculative frenzy, fueled by retail investor funds, gradually turned into a disastrous situation as the KOSPI began a sharp correction from late June, dragged down by a collapse in semiconductor stocks, leading to severe losses for retail investors.

According to CNBC, South Korea's current Minister of Economy and Finance, Koo Yun-cheol, personally apologized to the public during a National Assembly hearing on the 29th. Facing intense questioning from lawmakers, Minister Koo admitted that the government hastily approved the listing of single-stock leveraged ETFs without thorough evaluation and took responsibility for the flawed decision.

The South Korean Composite Index (KOSPI) has fallen below 6,000 points. (AP)

Meanwhile, Lee Eog-weon, Chairman of the Financial Services Commission (FSC), told the National Assembly that regulators are urgently assessing feasible defense mechanisms. 'If necessary, we will not rule out amending laws to restrict investment in such products to professional investors only, preventing more retail investors from facing financial ruin,' Lee said. He also pointed out that given the excessive volatility of the current 2x tracking multiple, regulators could consider lowering the leverage cap for single-stock leveraged products if relevant legislation passes, thereby stabilizing abnormal market fluctuations and protecting ordinary investors.

Since the government first allowed listings on May 27, retail speculation has exploded. According to KB Financial Group statistics, since the launch, South Korean retail investors have cumulatively net purchased 14 trillion won (approximately NT$313.15 billion), a figure far exceeding the 2 trillion won (approximately NT$44.74 billion) net purchase by foreign institutional investors.

SK Hynix Single-Stock Leveraged ETF Drops Over 80%

This stock market plunge has been particularly devastating for South Korean retail investors who heavily leveraged bets on leveraged ETFs of the semiconductor giants Samsung Electronics and SK Hynix.

South Korean memory giant SK Hynix listed its ADR on the U.S. Nasdaq. (from official social media)

Taking the 'KODEX SK Hynix Single Stock Leverage ETF'—which tracks twice the daily price movement of SK Hynix—as an example, real-time data shows the product has plummeted over 80% since its all-time high on June 23. Another similar 2x leveraged product tracking Samsung Electronics has also declined nearly 75% since its peak on June 3.

The broader market index, KOSPI, has crashed nearly 35% in the past month alone. On the 29th, it plunged another 5.98% intraday, dropping to 5,663.24 points, wiping out the principal of countless leveraged retail investors.