[Anchor]

After plummeting nearly 10% yesterday (June 23), the KOSPI rebounded by more than 3% today. Samsung Electronics surged nearly 10% on news of an imminent 90 trillion won share buyback, helping to lift the index. However, the KOSPI still showed extreme volatility, with a swing of nearly 500 points today. The KOSPI 200 Volatility Index, often referred to as the "Korean fear index," has also soared to an all-time high.

There are growing concerns that leveraged ETFs tied to Samsung Electronics and SK Hynix are exacerbating this volatility. Min Gyeong-ho analyzes the background.

[Reporter]

The 9/11 terrorist attacks, the collapse of Lehman Brothers, and the COVID-19 pandemic—yesterday's plunge in the KOSPI was on par with the market impact of these historic events.

However, experts pointed to reasons such as concerns over monetary tightening due to high interest rates or profit-taking on semiconductor stocks that had previously surged.

In a sense, these seem like ordinary negative factors.

The fact that such routine issues have led to historic levels of volatility is notable, and single-stock leveraged ETFs for Samsung Electronics and SK Hynix are being cited as a primary driver of this instability.

On a trading screen, these products simply appear to move at twice the rate of the underlying asset. But how do they actually function in the market?

Consider a leveraged product with 1 trillion won in net assets.

Since it is a 2x leveraged product, it effectively represents 2 trillion won in the market.

Now, suppose the underlying asset drops by 10% in a single day.

Because the decline is doubled, the product's net assets would drop by 20% to 800 billion won.

To maintain the 2x leverage ratio, the product should theoretically represent 1.6 trillion won in the market, but the initial reduction was only 200 billion won.

To bridge this gap, asset managers must sell additional physical stocks or futures, a process known as rebalancing.

Ultimately, the initial 10% decline returns as an additional 10% selling pressure, which further amplifies the volatility of the underlying stocks.

The total net assets of domestic leveraged ETFs, including those tied to Samsung Electronics and SK Hynix, have reached 35.4 trillion won, more than tripling in just eight months.

[Choi Jae-won / Professor, Department of Economics, Seoul National University: With 35 trillion won in assets, if there is a 2x leverage and the market drops by 10% as it did yesterday, you could estimate that about 7 trillion won in selling volume comes from these leveraged ETFs.]

To make matters worse, the balance of margin loans and credit purchases has also surged to 39.4 trillion won, more than doubling in 14 months.

As financial authorities move to implement safety measures for leveraged products, the Bank of Korea has also warned that leveraged investing could become a risk factor that increases market volatility and amplifies investor losses.

(Reported by Min Gyeong-ho | Video by Kang Dong-chul | Video Editing by Kim Jun-hee | Graphics by Seo Hyun-joong, Lee Jun-ho, and Jang Chae-woo)