South Korean government halts leveraged ETFs after stocks plummet, losing over $2 trillion in value.

South Korean stocks plummeted, losing over $2 trillion in value after the index fell nearly 40% in just one month. The government has put a brake on leveraged ETFs, but experts fear it may not be enough to reverse the damage.

On July 30, 2026, at 1:32 PM, Reuters reported that South Korea's government's efforts to control leveraged ETFs, which are seen as accelerating stock market volatility, may not be enough to stop the escalating volatility, amidst losses of over $2 trillion in stock market value and growing discontent among retail investors.

After South Korea's stock market, once one of the world's hottest markets, turned bearish, with the index plummeting by about 40% in just one month, the hardest hit were retail investors—young people, senior citizens, and ordinary families—who had borrowed money to invest during the late stages of the bull market.

This situation is putting pressure on the government, which had previously supported stock market growth. Most recently, some investors have even laid wreaths in front of parliament to protest government policies.

Amid heavy selling on Wednesday, the governor of the Bank of Korea and top financial market regulators held an emergency meeting to discuss ways to mitigate market losses.

Following the meeting, the regulatory agency announced new measures, including limiting the amount of investment individual investors can make in leveraged stock-backed ETFs and increasing the trading costs for such funds. These measures aim to reduce the role of leveraged funds, which are seen as a major factor contributing to high volatility in the prices of large-cap South Korean stocks, both in upward and downward trends.

Although the government has rushed to implement control measures, many experts believe these approaches are insufficient. Kim Jin-wook, an economist from Citi Korea, stated that the new measures may help reduce volatility to some extent, but a Market Stabilization Fund established by the government would have a greater positive impact.

Meanwhile, the head of research at a Seoul-based securities firm, who requested anonymity, viewed the measure as hastily announced and lacking thorough consideration.

He pointed out that Hong Kong's measures announced on July 23, aimed at limiting leverage levels in investment products, are more effective at reducing forced selling during volatile market conditions.

Conversely, South Korea's measures do not cover investors who already hold funds because they do not force them to sell assets. Furthermore, they do not cover similar products listed and traded in New York and Hong Kong, meaning market volatility may continue.

Heavy selling in the market this week has resulted in more than 40 wreaths being placed in front of South Korea's parliament to express dissatisfaction with the government's handling of the situation.

Some of the messages on the wreaths read, "The government is killing small investors," and "It's time for retribution. I will pay back in the next election."

Inside parliament , South Korean Finance Minister Koo Yoon-chol faced intense pressure from opposition members and apologized for the government allowing such leveraged products without carefully considering the consequences.

Although the KOSPI index began to stabilize in Thursday's trading after two consecutive days of sharp falls, the market is far from recovering. Since hitting a record high in June, the market value has lost more than $2 trillion.

If the trend doesn't change, July could become the month with the sharpest decline in South Korea's stock market history.

This correction occurred despite major chip manufacturers like Samsung Electronics and SK Hynix reporting combined profits of 150 trillion won (approximately US$100,000 billion) in the latest quarter, reflecting that consumer confidence and selling pressure on leveraged products are currently influencing the earnings figures of listed companies.

Reference: reuters.com

Read news related to All stock situations around the world can be found here.