Samsung Electronics, SK Hynix swing wildly — analysts warn of 'tail wagging the dog'
![An employee works at the dealing room of Hana Bank in Jung-gu, Seoul, on Tuesday, as the Kospi closed down nearly 10 percent, barely holding the 8,200 line. [Yonhap]](https://wimg.heraldcorp.com/news/cms/2026/06/24/news-p.v1.20260624.62cf62051bc348088016743001c8ab84_P1.jpg)
A sharp selloff in South Korean AI-related stocks, including Samsung Electronics and SK Hynix, on Tuesday has renewed attention on the rapid growth of the global leveraged exchange-traded fund market, Bloomberg reported Tuesday (local time).
Leveraged ETFs are products designed to deliver a multiple of the gains or losses of an underlying asset. They have grown popular among retail investors drawn by the prospect of amplified returns.
Samsung Electronics and SK Hynix each fell more than 12 percent on Tuesday, dragging the Kospi down 9.99 percent. Markets have identified leveraged ETFs as one factor amplifying the volatility.
Global leveraged ETF assets have surpassed $290 billion, according to Bloomberg data. The Asian market accounts for $45 billion of that total, while the US market exceeds $220 billion.
Leveraged ETFs automatically buy and sell underlying assets to maintain their target multiplier, creating additional buying pressure in rising markets and selling pressure in falling ones. Nomura Securities estimates that leveraged ETFs generate about $9 billion in rebalancing demand for every 1 percent move in the market.
Alexander Altman of Barclays said the daily average rebalancing volume tied to US leveraged ETFs had reached about $20 billion over the past 10 trading days — roughly four times the one-year average. He described the situation as a classic case of "the tail wagging the dog," warning that "leverage in the equity market is creating a technically dangerous environment for risk" and that leveraged ETFs represent "the biggest technical risk in the current market, independent of any fundamental assessment."
Charlie McElligott of Nomura Securities warned that "Korea is one of the epicenters of the AI bottleneck trade, with structural dynamics around leveraged ETFs amplifying volatility," adding that the phenomenon is producing a "butterfly effect — stirring up a hurricane on the other side of the globe."
Assets in 16 leveraged ETFs tracking Korean semiconductor stocks, launched in May, have grown from $3 billion at inception to more than $9 billion.
yckim6452@heraldcorp.com
