South Korea is cracking down on high-risk retail investments in its major chipmakers following a significant market downturn. The finance ministry announced measures to limit access to leveraged exchange traded funds (ETFs), which have been blamed for amplifying market volatility.

The Kospi index has seen a sharp decline, largely due to sell-offs in SK Hynix and Samsung, key players in the global AI boom. Regulators expressed concern that these popular retail funds were exacerbating market swings. Although approved only recently, these ETFs allowed substantial bets on chipmakers' rallies, but have since seen rapid unwinding.

Leveraged ETFs tracking SK Hynix and Samsung have shed over two-thirds of their peak assets. New measures will cap retail investment in single-stock leveraged ETFs as a portfolio share and increase trading costs. Regulators are also seeking legal authority for market stabilization tools, similar to those in Hong Kong, and have faced criticism for the rapid approval of these products.