(Oct 7): Retail investors are estimated to have lost 2.3 trillion won (US$1.7 billion) from leveraged exchange-traded products tracking South Korea’s two chipmaking giants in just months, according to a lawmaker’s office, in the first revelation of the magnitude of risks from such bets.

Clients of 10 Korean brokerages incurred the losses from single-stock ETFs and notes tied to Samsung Electronics Co and SK Hynix Inc between May 27 and Aug 14, according to the office of Choi Eun-seok, a lawmaker from the opposition People Power Party.

Since their launch in May, the single-stock products have intensified volatility in Korea’s AI-centric stock market, where leveraged bets have propelled it into one of the world’s top performers before backfiring. The wild swings caused by the risky products have since prompted regulators to cool the fervor among mom-and-pop investors, resulting in a plunge in trading volume.

The data came from the financial watchdog Financial Supervisory Service, which collated information from brokerages including Mirae Asset Securities Co, Kiwoom Securities Co, Samsung Securities Co and NH Investment & Securities Co, Choi’s office said.

Since July, the authorities took measures including a temporary ban on new listings of the leveraged single-stock prodcuts, as well as a higher minimum cash deposit and training requirements for investors. They marked an about-face after regulators introduced the products in May, partly aimed at deterring local investors from piling into similar ETFs listed overseas.

While the leveraged products seek to amplify gains, they can also inflict outsized pain on investors when the tide turns in a market disproportionately exposed to the cycles of the AI industry, where the two Korean chipmakers sit at the centre of its supply chain.

Uploaded by Liza Shireen Koshy