South Korea’s finance minister, Koo Yun-cheol, issued an apology following heavy losses suffered by retail investors in single-stock leveraged Exchange Traded Funds (ETFs), which were introduced earlier this year without thorough regulatory oversight. These products, launched on May 27, attracted substantial interest, with retail investors purchasing 14 trillion won ($9.7 billion) compared to about 2 trillion won by foreign investors. The surge in speculative trading coincided with a sharp correction in Korea’s Kospi index, particularly impacting chip stocks.

The leveraged ETFs, especially those linked to semiconductor giants Samsung Electronics and SK Hynix, have experienced dramatic declines. For example, the KODEX SK Hynix Single Stock Leverage ETF, designed to double the daily price movement of SK Hynix shares, has plummeted over 80% since its peak on June 23. Similarly, the product tracking Samsung Electronics shares has fallen nearly 75% from its June 3 high. This downturn reflects broader market volatility, with the Kospi index losing almost 35% in just one month due to investor concerns over technology stocks.

In response to the turmoil, South Korea’s Financial Services Commission, led by Lee Eog-weon, is considering restricting these leveraged ETFs to professional investors only. Lee indicated that raising the investment threshold or reducing the leverage multiple could help mitigate volatility and protect retail participants. These measures would require legislative support and further public consultation, including stakeholder input through beneficiary general meetings.

The heightened regulatory scrutiny comes amid intense market volatility and significant retail investor losses following the rapid introduction of risky financial products. The government’s moves underscore growing concerns about the suitability of highly leveraged ETFs for everyday investors in volatile sectors such as semiconductors, and represent an effort to balance financial innovation with investor protection.