"Already a Gambling Den... Hard to Pull Korean Retail Investors Out" Casino Comparison Emerges Amid Leveraged Product Frenzy

The Economist, a British Business Weekly
Leveraged ETFs Amplify Volatility
"Investors Already Captivated by the New Products"

The Economist, a British weekly business magazine, compared the extreme volatility of the Korean stock market and the tendency of individual investors to flock to leveraged products to a ‘casino’.

Single Stock Leveraged Exchange-Traded Fund (ETF). Yonhap News Agency

On the 24th (local time), The Economist published an article analyzing recent trends in the Korean stock market, identifying the artificial intelligence (AI) boom as the key driving force behind the market’s rise. The magazine noted that Samsung Electronics and SK hynix are leading the memory semiconductor market essential for AI data centers, attracting both domestic and international investment into these two companies.

The Economist stated, "It is understandable that people want to invest, given how remarkably well Korean semiconductor companies are performing," but likened Korean individual investors to "impulsive gamblers," warning that speculative trading is intensifying market overheating. The magazine analyzed that aggressive leveraged investing by individual investors is further amplifying the market’s instability.

The Economist estimated that domestic individual investors have poured about $10 billion (approx. 14.6 trillion won) into leveraged exchange-traded funds (ETFs) this year. Due to the daily rebalancing structure of these products, rising stock prices trigger further buying, while falling prices lead to selling, thereby amplifying market volatility.

The Economist warned that such an operational structure not only increases investment costs and the risk of losses in highly volatile markets, but can also magnify the scale of both market gains and downturns. In particular, single stock leveraged ETFs, which track only specific stocks like Samsung Electronics or SK hynix, pose even higher loss risks compared to conventional ETFs that diversify across multiple assets, as they move in multiples of the underlying stock’s price. The article commented, "Korean investors are already deeply captivated by this attractive new product," and added, "No matter how much the financial authorities may regret it now, it will not be easy to pull Korean investors out of the casino."

The KOSPI index nearly tripled since early 2025, but has fallen by about 25% since June. Lee Chanjin, Governor of the Financial Supervisory Service, said in a recent presidential work report, "I fully accept my responsibility as a market supervisor." He also admitted at a press conference last month, "I regret I did not go to greater lengths to block the implementation of this system."

The Financial Services Commission announced that from July 31, it will raise the minimum deposit for single stock leveraged ETFs to 30 million won. Since the total volume of these products has already grown to over 10 trillion won, it is difficult to consider delisting them, so the authorities appear to be choosing to increase the entry barrier by tightening the minimum investment requirements instead.

This content was produced with the assistance of AI translation services.