The Two Faces of the Semiconductor Boom: Fueling Stock Market Volatility and Driving Housing Demand

Bank of Korea Monetary and Credit Policy Report


Surge in Leveraged ETF and Leverage Investing

99% of KOSPI Surge Attributable to Samsung Electronics and SK hynix

Resolving Semiconductor Concentration Is Key to Long-Term Growth


High Growth Fuels Increased Demand for Home Purchases

Seoul Metropolitan Housing Prices and Household Loans Continue to Rise

Consistent Regulatory Stance on Household Loans Needed

The Bank of Korea has analyzed that investments in single-stock leveraged exchange-traded funds (ETFs) such as Samsung Electronics and SK hynix, as well as individuals' "leverage investing" (investing with borrowed money), have increased volatility in the domestic stock market. The analysis points out that resolving the concentration in semiconductors is essential for laying the groundwork for the long-term growth of the KOSPI. The rapid economic growth driven by semiconductors may further stimulate demand for home purchases, highlighting the need for consistent household loan regulation policies from the government.

The Contribution Ratio of Samsung Electronics and SK hynix to the Index Surge Reached 99.0% When the KOSPI Jumped from 8,000 to 9,000

In its Monetary and Credit Policy report released on the 10th, the Bank of Korea diagnosed that expectations for a sustained increase in stock prices have led to a rapid surge in investments in leveraged ETFs, which have in turn amplified price volatility from a supply-demand perspective. It further analyzed that the increase in leveraged investments in domestic stocks by foreign investors has led to a rise in domestic spot and futures trading for hedging purposes, thereby impacting the local market.

It was also explained that individuals’ leveraged investing grew to an all-time high and, upon liquidation, intensified both upward and downward moves in stock prices. The Bank of Korea found that, even in international financial markets, the expansion of leveraged investments targeting domestic stocks had unexpected ripple effects.

A strong dependence on the semiconductor industry has also played a role. When the KOSPI surged from 8,000 to 9,000, the contributions of Samsung Electronics and SK hynix to the index rise reached 44.7% and 54.3%, respectively—a combined total of 99.0%. Even during the sharp drop of the KOSPI from 9,100 to 5,500, the declines attributable to Samsung Electronics (29.8%) and SK hynix (39.6%) totaled 69.3%. While stock prices of leading memory chip companies in the US and Japan also saw significant fluctuations, their overall impact on those stock markets was limited due to their smaller weights compared to the Korean market.

The realization of profits by foreign investors and the rebalancing of investment assets (adjusting portfolio weights) have also affected supply and demand. The report explained that with domestic stock prices having risen much more than those in major countries, foreign investors engaged in large-scale sell-offs to realize gains and readjust their portfolios.

Although stock price volatility has eased somewhat recently, the semiconductor stock concentration remains pronounced, prompting calls for close monitoring of volatility risk factors. At a press briefing, Deputy Governor Park Jongu of the Bank of Korea noted, "Although the scale of leveraged ETFs has decreased significantly, we are not in a position to be complacent, and ongoing monitoring is necessary."

Apartment complexes are located in the area around Dongtan Station, Hwaseong City, Gyeonggi Province. Photo by Yonhap News Agency

High Growth Rate Stimulates Household Demand for Home Purchases..."Household Loan Regulatory Stance Must Be Maintained"

The Bank of Korea has also assessed that uncertainty has grown regarding recent housing price movements and household loan trends. While the trend of rising policy rates is expected to suppress household loan demand and dampen expectations for further increases in home prices, robust economic growth may increase household demand for home purchases. Therefore, the report emphasized that the government must maintain a consistent regulatory stance on household loans to avoid stimulating further market expectations.

Recently, housing prices for apartments in the Seoul metropolitan area have continued to rise, especially among mid- and low-priced homes. This trend is being driven by concerns over a supply shortage and heightened demand from real buyers amid instability in the rental and leasing markets. Since July, the pace of price increases has slowed significantly in the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan District. In contrast, the outer areas of Seoul and regulated zones in Gyeonggi Province have continued to see strong upward trends. According to Korea Real Estate Board, the home price increase rate for the three Gangnam districts and Yongsan District shrank to 0.174% as of July 20, and has been declining for three consecutive weeks since August 17. Meanwhile, the outer areas of Seoul have maintained a 0.3–0.4% rate of increase.

Despite stringent lending regulations and comprehensive management by financial institutions, household loans have continued to rise in tandem with increased housing transactions. Deputy Governor Park commented, "As home prices in the Seoul metropolitan area continue to climb and household loans increase steadily, risks of financial imbalance are accumulating."

The circumstances ahead are not expected to be easy, according to the report. The Bank of Korea noted that if the government's "rapid housing supply plan" announced on August 13 is carried out smoothly and reassures the market regarding supply shortages, it could help stabilize the housing market. However, the report cautioned that it remains uncertain whether supply-demand conditions will improve significantly in the short term.

The report pointed out that with uncertainty on the supply side unresolved, demand for home purchases could continue to grow. As South Korea’s economic growth accelerates, stronger corporate profits and rising nominal wages could boost household purchasing power, further increasing demand for homes. Indeed, in the first half of this year, a combination of bonus payouts and expectations of expanded company loans at some semiconductor firms contributed to sharper increases in home prices, especially in the "semiconductor belt" areas of Hwaseong Dongtan, Yongin, and Suwon Yeongtong.

Amid these trends, the Bank of Korea also noted that the expansion of the government’s household debt cap could serve as a driver of further household loan increases, depending on the trajectory of the housing market. On the government's recent policy to loosen total household loan caps, Deputy Governor Park stated, "Although easing the cap does pose a risk for increased household debt, we do not view it as a fundamental shift in the government’s commitment to consistent macroprudential management." He stressed, "In the future, it will be necessary to maintain a consistent policy stance to avoid stimulating housing market expectations or an uptrend in household debt."

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