Leveraged ETFs fuel KOSPI volatility, intensifying focus on Samsung and Hynix

The introduction of single-stock leveraged Exchange Traded Funds (ETFs) has significantly amplified the concentration of market capitalization in Samsung Electronics and SK Hynix on the South Korean stock market. This trend has led to the KOSPI index experiencing sharp fluctuations, behaving more like an individual stock than a broad market index.

Data from the Korea Exchange reveals that since the launch of these leveraged ETFs on May 27, the combined market share of Samsung Electronics and SK Hynix in the KOSPI surpassed 50% for the first time. This represents a dramatic increase from their 20% share a year prior. The concentration had been steadily rising, exceeding 30% in the latter half of 2025 and hovering around 40% after the KOSPI first broke 5,000 points in March 2025. Within just over a month of the leveraged ETFs' debut, their combined market share climbed to 57.1% as of June 25.

This intensified concentration is largely attributed to a shift in investment strategies. Investors are increasingly favoring leveraged bets on Samsung Electronics and SK Hynix through these new ETFs, rather than diversifying across the broader semiconductor sector via traditional ETFs. Analysis from FnGuide and Yuanta Securities shows that from May 27 to June 26, single-stock leveraged ETFs occupied the top four positions in net inflows within the entire ETF market, attracting a combined 13.2 trillion won. Conversely, established semiconductor ETFs like 'KODEX Semiconductor' and 'TIGER Semiconductor TOP10' experienced net outflows totaling 6.6 trillion won, ranking among the top funds with outflows.

Shin Hyun-yong, a researcher at Yuanta Securities, noted that the market is witnessing a deepening consolidation around Samsung Electronics and SK Hynix, moving away from broader industry diversification. This extreme concentration means the KOSPI's movements are heavily tied to the performance of these two semiconductor giants. For instance, on the day of the report, the KOSPI closed down 0.20% to 8394.65, despite 820 out of 918 listed companies seeing gains. The declines in Samsung Electronics (-4.86%) and SK Hynix (-1.68%) were the primary drivers of the overall market drop. The Korea Composite Stock Price Volatility Index (VKOSPI), often referred to as the 'Korean Fear Index,' surged to a record high of 96.94.

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The concentration is intensifying, with a compressed focus on Samsung Electronics and SK Hynix rather than diversification across the entire industry.