Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Semiconductor rally turns into debt-fueled leverage boom
The SK hynix logo and a computer motherboard appear in this photo illustration created Aug. 25. Reuters-Yonhap
By Lee Yeon-woo
Speculative investments fueled by Korea's semiconductor boom are on the rise as more retail investors take on debt or trade heavily in leveraged exchange-traded funds (ETFs), industry officials said Sunday.
One striking example came during Friday's session, when the "SK Hynix Daily 2x Leveraged Product," which solely tracks the Korean chipmaker, surged 17.64 percent on the Hong Kong stock market. The jump was unusually large, given that SK hynix shares rose just 4 percent in the Korean market that day.
Investor enthusiasm was also evident on Thursday, the ETF's debut, when it soared 17.73 percent. The underlying stock, however, rose 7.1 percent in the domestic market.
A similar trend has been observed in the "Samsung Electronics Daily 2x Leveraged Product." It has surged more than 195 percent since its launch in May — about 2.6 times the gain of the underlying Samsung Electronics shares over the same period.
CSOP Asset Management, the Hong Kong-based issuer of both products, said a significant portion of the inflows likely came from Korea, although it did not disclose specific figures.
The sharp moves underscore growing investor appetite for high-risk trades amid restrictions on leveraged trading in Korea. Triple-leveraged and inverse ETFs, as well as double-leveraged products tied to single stocks, are banned from listing at the Korea Exchange.
SK hynix, in particular, was placed under "investment caution" by the Korea Exchange on Oct. 13 following a rapid price surge and concentrated buying by a few accounts. As a result, margin trading in the stock was suspended for five days, prompting Korean investors to turn to overseas markets for leveraged exposure.
Samsung Electronics' office in southern Seoul, Jan. 31. Korea Times photo by Ha Sang-yoon
As funds poured in over a short period, CSOP Asset Management issued a rare warning.
"Given the recent rapid surge in share prices, there are short-term risks of valuation normalization and market correction," the asset manager said. "Investors should carefully consider their entry timing, manage position sizes appropriately and focus on risk management."
Still, the semiconductor rally shows no signs of cooling. SK hynix has climbed 39.6 percent over the past month, rising from 333,500 won ($234) to 465,500 won. Samsung Electronics has gone up 25.2 percent, closing at 97,900 won Friday.
Major brokerages are raising targets, with most now forecasting SK hynix over 500,000 won and Samsung Electronics above 110,000 won.
"Robust demand in the memory chip sector appears sustainable for more than a year," said Kim Rok-ho, an analyst at Hana Securities. "We expect Korea’s two major memory makers to soon enter an era with a combined market capitalization surpassing 1,000 trillion won."
The boom has also pushed margin financing to a 2025 high. Margin loans in Korea's stock market reached 23.83 trillion on Wednesday, up 49 percent from the end of 2024, according to Korea Financial Investment Association data.
Experts are warning about the risks of excessive leverage.
"Margin trading has risen sharply, particularly among younger investors and those in their 50s and 60s," the Korea Exchange and KOFIA said in a statement. "We urge caution against taking on leverage beyond one's repayment capacity."