[Editorial] In a Surging Market, Beware of 2x Leveraged Samsung and SK hynix Products and Debt-Fueled Investing

The South Korean stock market has been on a relentless rally day after day. On the 27th, the KOSPI (Korea Composite Stock Price Index) extended its rebound above the 8,000 level from the previous day and climbed into the mid-8,000s intraday, pushing toward 9,000. Expectations that the Iran War may be nearing an end, along with growing excitement over a semiconductor supercycle, have also spilled over into the domestic market. Adding fuel to the rally were single-stock leveraged ETF products tied to Samsung Electronics and SK hynix, which were abruptly listed that day.
Global markets are now riding the AI semiconductor rally. Overnight on Wall Street, Micron surged by nearly 20% after upbeat forecasts from brokerages. Its market capitalization that day surpassed the dream threshold of $1 trillion. In the KOSPI market, SK hynix jumped more than 9% from the previous day, joining Samsung Electronics in the $1 trillion market capitalization club.
The KOSPI's improved strength, now chasing the 9,000 level, is striking. It is positive that South Korean stocks are finally being revalued after years of undervaluation. Rising share prices expand companies' investment capacity and provide capital to firms seeking growth through listings. The problem is the excessively rapid short-term surge and the unbalanced rally concentrated in a few stocks. The KOSPI first broke above 7,000 on the 6th. In less than 20 trading days, it has climbed into the mid-8,000s and is now eyeing 9,000. Rather than cheering for a run toward the dream 10,000 level, it is hard to ignore the fear of short-term overheating.
The combined market capitalization share of Samsung Electronics and SK hynix exceeded 50% for the first time ever that day. Although the semiconductor rally is a global phenomenon, it is rare to find a market that depends on just two stocks for half of its market value. The volatility picture for the KOSPI also points to unease. The KOSPI 200 Volatility Index, often called Korea's fear index, jumped 8.77% intraday to 74.06. That is the highest level since the global financial crisis.
The aftereffects of leveraged ETFs tied to Samsung Electronics and SK hynix also warrant caution. These products double the return swings based on the rise or fall of a single stock. It is true that the two companies are flagship names in the Korean market and major beneficiaries of the AI boom, but that cannot serve as a justification for blind, debt-fueled investing. Investors should repeatedly remember that 2x leveraged ETFs are high-risk derivative products. They are not magical tools that simply double profits. When share prices rise, gains are doubled, but when prices fall, losses are doubled as well.
In particular, because these products repeatedly amplify daily returns, losses in the leveraged product can accumulate more sharply than losses in the underlying stock during a market that moves up and down.
It is also important to note that long-term holding can erode asset value, contrary to expectations. In the end, such products can encourage short-term trading rather than long-term investment and risk turning the market into a playground for speculation. The government relaxed regulations late last year to encourage the return of Korean individual investors investing in overseas stocks, but in a market rising this sharply, the side effects could be significant. At this moment, careful investor protection measures from the authorities and rational investment judgment from each individual are urgently needed.