The Bank of Korea urged tighter monitoring of overseas derivatives linked to
Korean chipmakers, warning their rapid growth could amplify domestic market
volatility. In its semiannual monetary report to the National Assembly the bank
said concentration in semiconductor stocks, foreign investor rebalancing and the
build-up and unwind of domestic leverage were key drivers of unprecedented KOSPI
volatility from January to July, and cited a leveraged bet by a hedge fund
called Situational Awareness as a recent example. It said global banks and ETF
managers hedging total-return swaps traded Korean spot, futures and options,
which amplified price swings. While not naming cases, the report noted a July
anomalous trade in SK Hynix in the offshore crypto derivatives market triggered
nearly $60m of liquidations, highlighting rising cross-market risks from
leveraged products tied to Korean chipmakers.
