The Bank of Korea (BOK) has warned that rising leveraged investments linked to South Korea’s major semiconductor companies could increase financial market volatility as investors continue to bet heavily on the artificial intelligence-driven chip boom.
In its latest monetary policy report, the central bank said the rapid growth of leveraged exchange-traded funds (ETFs) and investments made with borrowed funds had contributed to sharp movements in South Korean stock prices. The BOK also highlighted the growing concentration of the domestic market around semiconductor companies, particularly Samsung Electronics and SK hynix.
The two companies have become increasingly important to movements in the benchmark KOSPI index as demand for memory chips has grown alongside artificial intelligence infrastructure. According to the BOK, Samsung Electronics and SK hynix together account for roughly half of the KOSPI’s market capitalization, making movements in their share prices more influential on the broader market.
The central bank said the concentration became particularly visible during the recent swings in the Korean stock market. When the KOSPI climbed from 8,000 to 9,000, Samsung Electronics and SK hynix together accounted for about 99% of the index’s increase, according to the report.
The BOK also pointed to the expansion of leveraged ETFs as another source of risk. These products allow investors to take amplified positions on underlying stocks, meaning both gains and losses can be magnified. When leveraged positions are unwound, the resulting selling pressure can further increase market movements.
The issue is not limited to domestic investors. The BOK said leveraged investments targeting Korean stocks have also expanded in international financial markets. Overseas financial products linked to major Korean semiconductor companies can create additional channels through which global trading activity affects domestic stock prices.
The central bank noted that the value of Hong Kong-listed ETFs linked to Samsung Electronics and SK hynix increased more than 20-fold during the first half of the year. It warned that the rapid expansion of such products could create unexpected spillover effects across financial markets.
Although market volatility has eased after some leveraged positions were unwound, the BOK said risks remain because semiconductor stocks continue to represent a significant share of the Korean market.
The central bank has called for stronger monitoring of leveraged ETFs and borrowed investments, along with measures to improve the overall resilience of the country’s capital markets.
The warning comes as South Korea remains one of the world’s most important semiconductor markets and a major beneficiary of the global AI investment cycle. However, the BOK’s assessment highlights how concentrated exposure to the sector and increased use of leverage can also make financial markets more sensitive to changes in investor expectations surrounding the AI and semiconductor industries.
