A product built to lure money home from Hong Kong ended up bringing back less than a tenth of what regulators expected, market commentator Meru writes in a follow-up to his May piece on Samsung and SK Hynix's 2x leveraged ETFs. In May 2025, Hong Kong's CSOP Asset Management listed the world's first 2x leveraged product tracking a single Korean stock, Samsung Electronics, because Korean rules capping any single stock at 30% of an ETF made the same product impossible to launch at home. It returned 170% in five months. A follow-up SK Hynix 2x product did even better, climbing 1,305% and becoming Hong Kong's largest ETF and the world's biggest single-stock leveraged product, with Samsung's version growing to $10.8 billion and SK Hynix's to $16.8 billion.
As the won kept weakening, currency authorities reasoned that Korean money parked in Hong Kong could be pulled home to help defend the exchange rate, on the theory that investors were routing through Hong Kong only because no domestic single-stock 2x product existed. The financial regulator announced deregulation in January and revised the enforcement decree in April to allow single-stock leveraged and inverse ETFs onshore. The math behind it was off. Korea Securities Depository data showed Korean money in the Hong Kong products totaled just $320 million combined, a small fraction of the roughly $27 billion parked there. Foreign investors comfortable trading in Hong Kong had no reason to switch into won just because a domestic version existed. After launch, only about 500 billion won actually flowed back, and Hong Kong's outstanding volume barely moved. Most of the 14 trillion won raised domestically came from investors rotating out of Korean stocks, not capital returning from Hong Kong.
Repatriation barely worked; side effects grew too large
Hong Kong volume fell 3 trillion won; it helped stabilize the won
Inflows have since cooled sharply. Combined market cap of the domestic 2x products, which topped 16 trillion won on June 25, has since dropped by more than 6 trillion won, and weekly inflows fell from the trillions to just 53.4 billion won last week. Regulators moved up a minimum-deposit rule, the 30-million-won threshold meant to keep undercapitalized retail traders out of the riskiest products, from an August 5 start to July 31. DB Securities estimates the tighter rule could shrink assets to around 5.5 trillion won within two months, implying roughly 13 trillion won in actual selling once the 2x multiplier is factored in.
Why it matters · A policy justified as currency defense doesn't hold up against the actual capital-flow data, and regulators are now publicly disagreeing about whether it worked at all.
Worth asking · Korea's domestic 2x leveraged ETF failed to defend the won as intended. Does it still serve a different purpose for domestic investors?