STOCKS | Bank of Korea Flags Risks From Rapid Growth in Single-Stock Leveraged ETFs

The Bank of Korea told South Korea’s National Assembly in a written submission that the rapid expansion of single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix may be amplifying structural crowding and volatility risks in the Korean stock market. According to Odaily, the central bank said the two companies’ combined share of the market’s capitalization and trading has risen sharply. The Bank of Korea reported that the pair’s combined market-cap share increased from about 36.1% at the end of last year to more than 55% recently. Their share of trading value rose from 27.9% to 63.5%. South Korea’s financial regulators expressed similar concerns, saying they need to continuously monitor the potential effects of these products on market stability and systemic risk. Regulators said single-underlying leveraged ETFs could intensify one-way capital flows when market sentiment shifts. They added that if market conditions reverse, intraday rebalancing and derivatives hedging mechanisms could further amplify price volatility.