The AI casino is closing

The AI unwind has meaningfully altered Korea's market structure. Leveraged ETF assets have halved, speculative positioning has moderated and short-selling activity has declined. Yet elevated market concentration and ETF rebalancing flows continue to leave the KOSPI unusually sensitive to moves in its largest semiconductor stocks.

Korea's leveraged ETF AUM has fallen from a peak of US$53bn to US$26bn, although leveraged exposure still represents 2.1% of the market's free float.

Assets in single-stock leveraged ETFs have halved (US$bn).

Leveraged ETF turnover as a share of cash equity turnover has exploded in Korea's AI champions. The associated rebalancing flows increasingly resemble a large synthetic short-gamma position, amplifying market moves and draining liquidity during periods of elevated volatility.

Korea's concentrated market amplifies index sensitivity.