Korea-listed Samsung and SK Hynix ETFs are built to sell when the market drops. That is why the Kospi keeps crashing at the close.

By Mia Park · Korea Desk · July 16, 2026

Key points

A 2x leveraged ETF has to trade in the same direction as its stock, so it sells more when the stock falls and buys more when it rises, and it does this near the market close.
Samsung Electronics and SK Hynix are more than half of the Kospi (about 51% in late May, past 55% by mid-July), so ETFs built on them move the whole index, not just two stocks.
On the June 23 crash, forced rebalancing sell orders from these products reached about 9.2 trillion won, roughly $6 billion, concentrated in the final part of the session.
Regulators announced on July 16 that the deposit to trade these ETFs will rise to 30 million won in August, with a new 20-share minimum trading unit following in November, after President Lee Jae-myung named the products directly on July 15.

I grew up in Korea, and lately I have had a lot of conversations with friends back home about how much the Kospi has been swinging. Most of the blame lands on the usual places: the AI selloff on Wall Street, retail investors using too much borrowed money, the war in the Middle East. Those are all real. But there is one piece that does not get explained enough for people outside Korea, and it is the most mechanical part of the whole thing. It is a type of fund that is built, by design, to sell when prices are already falling.

How a 2x leveraged ETF actually works

A single-stock 2x leveraged ETF promises to move twice as much as its stock does each day. If Samsung Electronics rises 3% today, the ETF aims to rise about 6%. If Samsung falls 3%, the ETF falls about 6%. To keep that promise every single day, the fund has to do something that sounds backwards the first time you hear it.

Think about it with round numbers. Say you put in 100 dollars of your own money, and the fund borrows to hold 200 dollars of Samsung, which is your 2x. Now Samsung drops 10%. Your 200 dollars of stock loses 20 dollars, so you are left with 80 dollars of your own money, but you are still holding about 180 dollars of stock. That is more than 2x now. To get back to a clean 2x on your smaller 80 dollars, the fund must sell stock. It sells into the fall.

The reverse is also true. When the stock goes up, the fund is suddenly holding too little, so it has to buy more, into the rise. This is the core of it: a leveraged ETF always trades in the same direction the market just moved. It never buys the dip. It sells the dip, and it buys the top. That is not a mistake in the product. That is the product.

Why it all happens right before the close

Here is the part that turns a strange design into a market problem. The fund has to finish its rebalancing by the end of the day, so the value matches its 2x target at the closing price. In practice that selling and buying gets pushed into the last part of the session, mostly after 3 p.m. Korean time.

So on a day when Samsung and SK Hynix are already down, the leveraged ETFs come into the final stretch and have to sell, all at once, into a market that is already weak. That pushes the price down a little more, which means the funds technically have to sell a little more. Professor Lee Yun-soo of Seoul National University described these products, in a widely shared column, as a double motor bolted onto the heart of the Kospi. It is a good picture. The selling feeds the selling, right at the moment of the day when there are the fewest buyers left to absorb it.

Why this is so much worse in Korea than in the US

Plenty of countries allow leveraged ETFs. The reason they are more dangerous here comes down to one number: concentration. Samsung Electronics and SK Hynix together were about 51% of the Kospi in late May, and that share grew past 55% by the middle of July. Two companies are more than half of the entire market.

Compare that to the US. Nvidia is one of the biggest stocks in the world, and it is only about 8% of the S&P 500, because 500 companies share the weight. A leveraged ETF on one American stock is a bet on one company. A leveraged ETF on Samsung or SK Hynix is close to a bet on the whole Korean market, because those two stocks basically are the market. So when these funds rebalance at the close, they are not nudging two names. They are moving the index itself. I wrote more about why that concentration makes the Kospi so violent here.

It even hurt people who never bought these funds

The strangest part is who ends up paying for it. When these leveraged ETFs launched in late May, money rushed in fast. About 2.2 trillion won, close to $1.5 billion, moved out of ordinary semiconductor ETFs and into the new leveraged ones. But the ordinary funds had to sell their own holdings to fund those exits, so other chip stocks got pushed down too. Someone who bought a plain, boring semiconductor ETF, with no leverage at all, still felt the selling.

You can see the pressure in the trading data. Samsung's closing-auction volume rose to about 165% of its pre-listing average once these products existed, and SK Hynix's rose to about 169%. On the June 23 crash, the forced sell orders from these funds reportedly reached about 9.2 trillion won, roughly $6 billion, in a single day. That is not investors deciding to sell. That is a formula deciding for them.

What regulators are doing now

The government has finally moved, though not overnight. President Lee Jae-myung named these ETFs directly on July 15, when he called the market unstable and told regulators to act fast, which I covered in our reporting on the latest Kospi crash. The next day, Korea's Financial Services Commission announced its response: the minimum deposit needed to trade these single-stock leveraged ETFs will rise from 10 million won to 30 million won, roughly $20,000, starting in August, and a new rule will require trading in blocks of 20 shares at a time starting in November, once brokers have the systems ready. That is not a cap on how many shares someone can own, it raises the minimum size of each trade. The idea behind both changes is to keep smaller investors from getting wiped out by a product most of them did not fully understand.

Professor Lee's argument, and I think he is right, is that the rules still mostly address the individual buyer. They make it harder for one person to lose everything. They do not really touch the bigger issue, which is all that automatic selling landing on the market at the same moment, on two stocks that happen to be half the country's index. That part has not been fixed yet.

The bottom line

Leverage on a single stock is risky for the person who buys it. Everyone knows that. What Korea learned this summer is that when the single stock is really half of the whole market, the risk does not stay with the buyer. It spreads to everyone, at 3 p.m., whether they signed up for it or not.

Sources

Figures are from South Korean market reporting and Korea Exchange data as described above, converted to US dollars at roughly 1,500 won to the dollar. This is general information about market structure, not investment advice.

Frequently asked questions

Why does a 2x leveraged ETF sell when the stock falls?

To keep a constant 2x exposure, a leveraged ETF must trade in the same direction the market just moved. When the stock falls, the fund's leverage drifts too high relative to its shrunken capital, so it sells some holdings to get back to 2x. When the stock rises, it buys more. It sells into declines and buys into rallies by design.

Why do leveraged ETFs trade near the market close?

These funds have to rebalance so their value matches the 2x target at the closing price, so the trading is concentrated in the last part of the session, mostly after 3 p.m. Korea time. On a down day that puts a wave of automatic selling into an already-weak market when few buyers are left.

Why are single-stock leverage ETFs riskier in Korea than the US?

Because of concentration. Samsung Electronics and SK Hynix together are more than half of the Kospi (about 51% in late May, past 55% by mid-July), so a leveraged ETF on them moves the whole index. By comparison, Nvidia is only about 8% of the S&P 500, so a US single-stock ETF is a bet on one company, not the market.

What has Korea done to restrict these ETFs?

Regulators raised the minimum deposit to trade single-stock leveraged ETFs to 30 million won (roughly $20,000) and capped purchases at 20 shares. President Lee Jae-myung named the products directly when calling the market unstable. Critics note the rules mostly protect individual buyers and do not yet address the concentrated close-of-day selling itself.

Mia Park · Korea Desk

Mia Park was born and raised in Korea and covers its markets and news for AIStockWire, from the Kospi to Samsung and SK Hynix. She got her start writing for a Korean entertainment blog, a long way from stock filings, but she has always liked knowing what is happening back home before anyone else does.