South Korea Halts Leveraged ETPs as Kospi Wipes Out $1 Trillion

The South Korean government has temporarily halted new listings of single-stock leveraged exchange-traded products to mitigate extreme volatility and speculation driven by leveraged trading. This regulatory action follows a severe market downturn in which the $4 trillion equity market, specifically the Kospi Index, dropped 25% since its June peak, wiping out $1 trillion in value.

Recent data shows the Kospi has emerged as a global barometer for AI and semiconductor risk. The index now maintains a 60-day correlation to the Nasdaq 100 of 0.46, which is nearly triple its five-year average. This linkage is driven by the critical roles of Samsung Electronics Co. and SK Hynix Inc. in the global memory chip supply chain. The influence of the South Korean market has expanded further following the U.S. listing of SK Hynix, allowing fund managers in New York, London, and Tokyo to track these assets across a 24-hour cycle.

The volatility was highlighted during the week ending July 19, 2026, when a local selloff triggered a nearly 9% drop in the Kospi. This downturn subsequently dragged down U.S.-listed shares of SK Hynix by 9.3%. Despite the recent crash, the Kospi remains up 62% for the year. JPMorgan Asset Management (Japan) Limited noted the increased significance of the market, with its chief Asia market strategist briefing the global team on Korea for the first time in 14 years.