Investing.com -- South Korea’s top financial regulator expressed regret Monday over approving a batch of high-leverage single-stock ETFs last month, setting off a violent selloff in memory chip shares that spread from Seoul and Hong Kong into US pre-market trading ahead of Tuesday’s NYSE open.

Samsung Electronics (005930) fell 12.31% to 310,000 KRW in Seoul, and SK Hynix (000660) dropped 12.47% to 2,555,000 KRW, with both stocks opening sharply higher before collapsing through the session. The magnitude of the moves helped push the KOSPI down roughly 9-10% from its recent record high, triggering a market-wide circuit-breaker trading halt. Nasdaq 100 futures were down more than 2% ahead of the US open, putting the index on pace to shed more than $1 trillion in market value, Reuters reported.

The catalyst was a Monday briefing from Financial Supervisory Service Governor Lee Chan-jin, who said he wishes he had done more to block the late-May launch of 16 single-stock leveraged ETFs tracking Samsung and SK Hynix. Those funds held combined assets of $3 billion at launch but have since swelled to roughly 14 trillion won ($9.1 billion), with approximately 92% of holders being retail investors. "These are high-risk products," Lee said. "Despite consumer warnings, trading hasn’t cooled."

In unusually candid language for a sitting regulator, Lee described his inaction as a personal failure. "Half-joking, but I should have just stayed put then, and I have a lot of regrets," he said. "Reflecting on the situation, wondering if I should have laid down to protest the launch by any means necessary to block it then." The FSS said it is coordinating with the Financial Services Commission and the Korea Exchange on potential stabilization measures, though no specific steps have been publicly detailed.

The Korean ETFs were modeled partly on the runaway success of Hong Kong’s CSOP SK Hynix Daily 2x Leveraged Product (7709.HK), which debuted in October 2025 and has grown to more than $14 billion in assets, making it the world’s largest product of its kind. Lee acknowledged the domestic launch was partly designed to keep Korean retail investors onshore rather than trading the Hong Kong product. "But that doesn’t appear to have been very effective," he said. On Tuesday, 7709.HK plunged 23.37% to 143.80 HKD in Hong Kong, while the CSOP Samsung Electronics Daily 2x Leveraged Product (9747.HK) fell 23.68%. Korean domestic ETFs were similarly crushed: KB RISE SK Hynix Single Stock Leverage (0192L0) lost 25.18%, and Samsung KODEX SK Hynix Single Stock Leverage (0193T0) shed 25.48%.

The mechanics behind the selloff illustrate how leverage products can amplify rather than merely track underlying moves. Goldman Sachs, in a note cited by reporters at the scene, estimated that a 5% swing in the Korean equity market could trigger roughly $4.7 billion in rebalancing flows by options dealers adjusting their hedges, an amount equal to about one-eighth of all shares traded on a normal day. The firm described the leveraged ETF dynamic as "more important than ever in the market."

The turbulence is consistent with concerns raised in the days before Tuesday’s session. KC Rajkumar, a senior technology equity analyst at Lynx Equity Strategies, had warned in a note last week that elevated volatility tied to leveraged memory ETFs was a risk investors should prepare for. Rajkumar noted that daily return volatility in Micron Technology (MU) jumped to roughly 7% over a 35-day May-June window, well above the 4+% seen in comparable prior periods, and that MU had returned 125% in May-June against 25% in March-April. "Higher daily volatility is a double-edged sword," Rajkumar wrote. "While the fundamentals surrounding MU and its cohort in flash/storage are benign, enhanced volatility in daily stock movement could just as likely induce stocks to give up above-normal monthly gains and mean revert to more sustainable returns. A 125% return in two months may not be sustainable."

With US markets yet to open as of this writing, the full extent of the damage to US-listed memory and semiconductor names remains to be seen. Investors will be watching Micron (MU), SanDisk (SNDK), Western Digital (WDC), Seagate Technology (STX), the leveraged memory ETF DRAM, and the broad semiconductor fund SOXL for confirmation of whether the Asian rout transmits fully into the US session. Pre-market futures already indicate a sharp open for the tech sector.

Looking ahead, the most immediate question is whether South Korean authorities announce concrete measures to cap leverage, suspend trading, or otherwise stabilize the ETF products that Lee publicly regretted approving. Any such announcement from the FSS, Financial Services Commission, or Korea Exchange could either calm the feedback loop or, if seen as inadequate, deepen it. For US investors, Tuesday’s open will serve as the first real test of how deeply a structural disruption in Korean leveraged products can rattle the global memory trade.