Korean ETF Market Embraces Fully Active and Single-Stock Leveraged ETFs
South Korean financial authorities are actively pursuing the introduction of 'fully active' ETFs, which are not bound by existing index requirements. Previously, all active ETFs in Korea were 'partially active', meaning they tracked benchmarks to some extent, but the new framework would enable asset managers to exercise full discretion in stock selection and portfolio allocation. Despite cautious voices from leading asset managers such as Samsung Asset Management, who raise concerns about risk and market impact, the Financial Services Commission is firmly maintaining its policy stance with a goal to propose enabling legislation in the National Assembly by the first half of 2026.
Additionally, the Financial Services Commission’s decision to permit single-stock leveraged ETFs is set to reshape the domestic market. ETFs providing 2x leverage on major stocks such as Samsung Electronics and SK Hynix are expected to be listed soon, which may help draw back investment capital that has been flowing overseas. However, there are concerns that the increasing concentration of assets in semiconductor-related ETFs may intensify industry-specific capital flows and increase volatility in large-cap stocks. Investors are thus advised to weigh risk management considerations alongside opportunities to bolster the competitiveness of Korea’s capital markets.
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