The Korea Exchange is exploring new exchange-traded funds with higher volatility and leveraged exposure to draw in retail traders, following a strong rebound in South Korea's benchmark market. The move comes after domestic investors increased participation in equities during recent market dips.
- KRX is considering launching leveraged and high-volatility ETFs to attract retail traders.
- Retail investors made up 63% of KRX equity trading volume in Q4 2025.
- Domestic ETF inflows reached ₩19.3 trillion ($14.7 billion) in Q4 2025.
- KOSPI index rose 5.2% in December 2025 after an 8.7% drop earlier in the month.
- New products may focus on semiconductor, clean energy, and AI hardware sectors.
- Regulators are assessing risks linked to leveraged ETFs amid past volatility spikes.
The Korea Exchange (KRX) is evaluating the launch of more aggressive ETF products targeting retail investors, signaling a strategic shift toward capturing growing interest from individual traders. This initiative follows a notable rally in the KOSPI index, which gained 5.2% in December 2025 after a steep 8.7% correction earlier in the month—a dip that many retail investors interpreted as a buying opportunity. Recent data shows that retail investors accounted for over 63% of total equity trading volume on the KRX during the fourth quarter of 2025, up from 54% in the same period the previous year. This surge coincided with record inflows into domestic equity ETFs, totaling approximately ₩19.3 trillion ($14.7 billion) in Q4 2025, according to public trading records. By introducing leveraged ETFs and those tracking volatile sectors like semiconductors and clean energy, the KRX aims to appeal to retail traders seeking higher returns. These instruments could include 2x or 3x daily leveraged funds tied to the KOSPI 200 index and thematic ETFs focused on AI hardware and battery technologies—sectors that have driven outperformance in South Korea’s tech-heavy market. Market participants expect the new ETFs to increase overall trading activity and deepen liquidity in derivative-linked products. However, regulators are also monitoring risks associated with leveraged products, particularly given the heightened volatility observed in late 2025 when some leveraged funds lost up to 45% of their value within days of sharp market swings.