South Korea’s top economic policymakers vowed to monitor factors that could intensify stock market volatility, as chip-driven swings in semiconductor stocks continue to dominate sentiment.

Officials blame excessive concentration in the semiconductor sector and the surge of single-stock leveraged ETFs for amplifying market swings and liquidity risks.

The finance ministry cautioned that the market’s growing concentration in chipmakers is a major source of volatility, with chip stock moves increasingly influencing the broader market.

On July 7, leveraged ETFs tracking Samsung Electronics and SK hynix plunged around 12% to 13%, with intraday declines near 20% and net assets down about 3 trillion yen equivalent.

The KOSPI fell as much as 4% in early trading, reached its lowest level since May, but later rebounded to modest gains, leaving the index about 15.6% below its June peak.

The index triggered its sixth circuit breaker of the year before recovering, underscoring the market’s volatility driven by chip shares.

Despite early losses, chipmakers helped stabilize later trading as volatility remained a defining feature of the week.

FSS Governor Lee Chan-jin criticized the hurried approval of leveraged ETFs, acknowledging hindsight and signaling potential tighter oversight.

Bank of Korea warned that ETF redemptions and portfolio rebalancing could amplify losses for retail investors during sharp declines.

Analysts say fundamentals remain intact, with memory chip demand firm into the third quarter and SK hynix’s U.S. listing plans offering some positive sentiment, though price pressure may weigh on downstream buyers.

Market dynamics suggest the rally has been powered by AI and memory-cycle catalysts, with high leverage and chip exposure potentially amplifying volatility if catalysts fade.

Regulators note the circuit-breaker-heavy week, tied to heavyweights like Samsung Electronics and SK Hynix, as part of a broader pattern of elevated volatility.