Leveraged exchange-traded funds focused on individual semiconductor stocks attracted approximately W7 trillion (about $5.2 billion) in net inflows over the past month, defying a broader downturn in the chip sector.
The surge in capital flows highlights a disconnect between retail investor behavior and the deteriorating fundamentals facing the industry, as traders continue to chase high-volatility instruments despite mounting downside risks.
The influx of funds into these high-risk products comes as South Korea’s financial markets face increasing structural pressure.
The rapid expansion of leveraged ETFs is exacerbating volatility, with regulators warning that the tail is beginning to wag the dog.
The Financial Services Commission (FSS) has previously cautioned that the boom in leveraged products could destabilize market dynamics, particularly when concentrated in a single, highly cyclical sector like semiconductors.
This retail-driven demand stands in stark contrast to the broader market sentiment, which has been weighed down by concerns over an unwinding AI trade and potential bear-market thresholds for the semiconductor sector.