The Bank of Korea is monitoring foreign investment products linked to Samsung and SK Hynix after the value of leveraged ETFs in Hong Kong surged to more than 20 times, while hedge funds used leverage as high as 4 times.
On September 10, 2026, at 10:00 AM, Bloomberg News reported that the Bank of Korea (BOK) called for increased monitoring of overseas derivative products linked to South Korean semiconductor companies' stocks, following the rapid growth of these products and their potential to increase volatility in domestic financial markets, particularly when highly leveraged by hedge funds.
The Bank of Korea (BOK) stated in its semi-annual monetary policy report submitted to parliament on Thursday that the unprecedented volatility in the Kospi index between January and July was largely due to the concentration of South Korean stocks in the semiconductor sector, portfolio adjustments by foreign investors, and the accumulation and reduction of leveraged positions domestically.
Furthermore, overseas hedge funds contributed to market volatility by creating large positions in Korean chip stocks using borrowed money or leverage, before rapidly reducing these positions during the sharp stock market downturn in July.
BOK cites Situational Awareness, a US fund focused on artificial intelligence (AI), as an example, which reportedly uses leverage up to four times to create and reduce investment positions in global memory chip manufacturers.
The warning comes amid a surge in demand for offshore investment products linked to Korean chip stocks, with BlackRock's US-listed Korean equity ETF, in which SK Hynix makes up about a quarter of the portfolio, experiencing record inflows of $2.8 billion in just one week in July.
The Bank of Korea (BOK) views the expansion of these products as creating more avenues for foreign capital flows to impact the South Korean domestic stock market.
Meanwhile, the market value of leveraged ETFs listed in Hong Kong that reference Samsung Electronics and SK Hynix stocks surged more than 20-fold in the first half of the year, reflecting the rapid popularity of products that increase returns through leverage.
The Bank of Korea (BOK) stated that global banks that hedge Total Return Swap (TRS) transactions with ETF managers are required to trade Korean stocks in the physical market, including futures and options, a process that could further amplify domestic stock price volatility.
In other words, even though these products are traded overseas, the large inflows and outflows of capital may require service providers and banks to adjust their positions in Samsung Electronics, SK Hynix, or related derivatives in the Korean market, allowing overseas buying and selling pressure to be directly transmitted back to the Korean stock market.
This risk became evident in July when a single erratic transaction in SK Hynix shares resulted in a liquidation of nearly $60 million in offshore crypto markets, highlighting how leveraged products linked to Korean chip stocks can have cross-market impacts.
Although the BOK did not specify this case as a direct example in the report, this incident underscores the increasing risks of interconnectedness between Korean chip stocks, ETFs, derivatives, and overseas financial markets.
The Bank of Korea (BOK) therefore believes it is necessary to increase monitoring of overseas derivative products referencing Korean stocks, especially Samsung Electronics and SK Hynix, as the rapid growth of leveraged products could lead to foreign capital flows amplifying volatility in the South Korean stock market.
Reference: www.bloomberg.com
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