On June 23rd, South Korean equities experienced a severe sell-off, with the KOSPI index plunging 9.99% and triggering a market-wide trading halt. This marked the largest single-day decline since March 4th. The sharp drop was led by significant falls in the two heavyweight semiconductor stocks, SK Hynix Inc and Samsung Electronics Co Ltd. This triggered substantial losses in global leveraged trading products linked to these two companies.
The previous trading session on June 22nd presented a starkly different picture. The market was in a state of fervor. The CSOP SK Hynix Daily Leveraged (2x) Product saw its total market value surpass HK$130 billion, overtaking the Tracker Fund to become the largest Exchange Traded Product (ETP) by size in the Hong Kong market. This product, listed for only eight months, had surged over 1000% year-to-date, becoming a rare "ten-bagger" fund. On the same day, the KOSPI index hit a fresh all-time high, and SK Hynix's market capitalization briefly exceeded that of Samsung Electronics. Various semiconductor leveraged products attracted massive inflows of capital.
The extreme volatility—one day of massive gains followed by a day of steep losses—has highlighted the characteristics of high-leverage instruments tied to single stocks. They amplify market movements in both directions and can exacerbate overall market volatility.
In a significant development on June 22nd, coinciding with the market's record high and the CSOP product's ascent to the top spot, the head of South Korea's Financial Supervisory Service (FSS), Lee Chan-jin, held a press conference. He expressed deep regret over the initial approval of domestic leveraged ETFs tracking Samsung and SK Hynix. Lee stated that the negative side effects of these products are continuing to expand and that their listing should have been blocked from the start. These comments have sparked widespread market discussion.
Addressing the growing market concerns, the FSS also indicated that regulators are coordinating with the Financial Services Commission and the Korea Exchange. They are evaluating a series of stabilization measures, including enhanced monitoring of trading patterns. The goal is to limit the contagion risk stemming from the extreme volatility of leveraged ETFs tracking Samsung Electronics and SK Hynix. The FSS emphasized that the related adverse effects are "intensifying."