South Korea's Leverage and Inverse ETF Market Surges to 31% of Daily Trading Volume, Sparking Volatility Concerns on July 6

According to Korea Investment & Securities on July 6, South Korea's leverage and inverse exchange-traded fund (ETF) market is growing rapidly and may amplify domestic market volatility through end-of-day rebalancing trades. While these ETFs account for only 7% of total ETF net asset value, they represent approximately 31% of daily trading volume across all ETFs—significantly higher than the U.S. market, where leverage and inverse ETFs comprise just 1% of net assets and 8% of trading volume.

Rebalancing demand for SK Hynix and Samsung Electronics leverage and inverse ETFs totaled 2.1 trillion Korean won and 300 billion won respectively from May 27 to end of June. During the same period, daily average trading volumes for these stocks reached 14.3 trillion and 11.2 trillion won, meaning rebalancing demand occasionally exceeded 10% of daily trading volume during high-volatility periods, according to Korea Investment & Securities analyst Jung Hyeon-jong.