Leverage ETF Rebalancing Not Primary Cause of Korean Stock Volatility, Researcher Notes on July 14

According to Yeom Dong-chan of Korea Investment & Securities, in a quantitative analysis report released on July 14, leverage-based ETF rebalancing demand is not the primary driver of recent volatility in South Korean equities, though it amplifies existing trends.

While South Korean and U.S. markets have similar leverage ETF market capitalizations relative to underlying assets, South Korea's largest leverage ETF accounts for over 20% of its underlying asset's trading volume, compared to 5% in the U.S. However, volatility expanded across trading sessions and was larger in morning sessions, when rebalancing activity concentrates in late afternoon. Yeom attributed the volatility spike primarily to global semiconductor sector swings tied to AI investment concerns, with leverage ETF rebalancing as a secondary amplification factor.