Seoul is tripling the cash Korean investors must hold to trade leveraged single-stock funds, an emergency attempt to contain the violent volatility that have triggered several emergency trading halts on the KOSPI index in recent weeks.
South Korean equities – as tracked by the iShares MSCI South Korea ETF (NYSE:EWY) – have fallen 21.7% over the past four weeks, the steepest four-week decline since March 2020.
That follows a rally of more than 330% from the fund's March 2025 lows to its mid-June highs.
What Seoul Just Changed
Korea's four top economic bodies – the Ministry of Finance and Economy, the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea – met Thursday and tightened the rules on single-stock leveraged funds tied to Samsung Electronics Co. (OTC:SSNLF) and SK Hynix Inc. (NASDAQ:SKHY).
The minimum deposit required to trade them rises to 30 million won, roughly $20,300, from 10 million won.
The bigger change is buried in the detail: that money must now be cash. Investors could previously cover up to 70% of the requirement with stocks or bonds they already owned.
Regulators also halted new listings until conditions settle, banned advertising for existing products, and raised the minimum order size to 20 shares from one.
What A Single-Stock Leveraged ETF Actually Does
A leveraged ETF is a fund built to deliver a multiple of a single day's move in what it tracks – here, one company's stock. If Samsung rises 3%, a two-times fund aims for 6%.
The catch is that the target resets daily. To hold that fixed multiple, the fund must buy more exposure after the stock rises and sell after it falls. It is mechanically forced to chase.
Scale it up and that forced selling stops being the fund's private accounting problem and becomes the market's price.
These funds were not an accident of financial engineering.
The government approved them in roughly four months for a stated policy purpose: pull Korean retail money back from U.S. equities and take pressure off the won.
How Big This Got, And How Fast
The 16 single-stock leveraged funds listed in Korea held 4.4 trillion won on May 27. Within a month they held more than 15 trillion. Daily turnover has exceeded 18 trillion won.
FSS Governor Lee Chan-jin said roughly 92% of the money in these products is retail.
Margin loan balances across Korean brokerages have climbed to 36.3 trillion won from 20.9 trillion a year ago.
The Whipsaw In New York
SK Hynix listed American depositary receipts on the Nasdaq on July 10, raising $26.5 billion in the largest U.S. listing ever completed by a foreign company.
The first days of regular trading have been violent.
The shares fell 9% Monday, rebounded 27.3% Tuesday, fell 9% again on Wednesday, and were down 7.6% in Thursday's pre-market session.
