'3x leveraged single-stock ETFs...pure gambling': Capitalmind CEO on what fuelled Kospi crash
South Korea's Kospi index slumped more than 11% on Wednesday, and 43% from its June peak of 9,386 to 5,311.77
- Jul 30, 2026,
- Updated Jul 30, 2026 3:58 PM IST
Capitalmind Mutual Fund CEO Deepak Shenoy on Thursday said South Korea's stock market correction reflects the risks of leveraged momentum investing and warned that debt-fuelled bets - not weak corporate earnings - could inflict the biggest damage as markets reverse.
South Korea's Kospi index slumped more than 11% on Wednesday, and 43% from its June peak of 9,386 to 5,311.77. The decline came as heavyweight chipmakers SK Hynix and Samsung Electronics came under intense selling pressure despite reporting strong earnings.
Don't Miss: Black Tuesday for KOSPI: South Korea's stock market crashes 11%; Samsung, SK Hynix lead rout
'GET OUT WHEN THE MOMENTUM'S LOST'
Commenting on the selloff, Shenoy wrote on X that investors chasing momentum should know when to exit.
"Rough move on the KOSPI, which went from 3000 to nearly 10,000 and is now at 5500. If you play momentum, you have to get out when the momentum's lost. You will still make out very decently if you don't go bonkers at the top."
The investor attributed much of the correction to excessive leverage among retail investors. The issue was with individuals in Korea taking leverage and participating when the markets were riding high, he added.
"3x levered single stock ETFs has to be the most clinically insane thing to do, just pure gambling. And then people borrowed money to buy these ETFs!"
Must Read: Kospi plunges, trading halted: Why South Korean market is seeing extreme volatility
INDIA HASN'T SEEN A SYSTEMIC MOMENTUM RISK YET
Drawing a comparison with India, Shenoy said domestic regulators have not permitted similar leveraged products, though margin-funded investing has been growing.
The CEO said that the Indian regulators don't allow it, but then there is hidden leverage too - MTF (Margin Trade Funding) is growing. "However, India hasn't seen a major momentum move in stocks that will create a systemic issue yet."
'GOOD EARNINGS, FALLING STOCKS'
Shenoy argued that the decline in South Korea's leading chipmakers reflected changing market sentiment rather than deteriorating business fundamentals.
"The big boys in the memory world like SK Hynix, Samsung etc are falling not because their results aren't good - the results are brilliant. Yet, when prices fall through good earnings, you can almost tell that the momentum rise is done."
He said the larger concern lay in leveraged positions built around these stocks. According to him, the next complexity isn't Hynix or Samsung; "these are going to be cash-rich. But the problem is in debt - the leverage taken by the players that hit these stocks is already getting hit."
Shenoy also cautioned that AI-linked investments financed through leverage could come under pressure if spending on artificial intelligence slows or competition drives down prices.
"The leverage taken by AI players will be a big hit if there is an actual slowdown in AI scale because competitors can bring far lower prices. The game is on."
WHY KOSPI CRASHED
The Kospi, Asia's best-performing equity market this year despite the recent correction, plunged into technical bear market territory after falling more than 43% from its June peak of 9,386.
The selloff followed SK Hynix's quarterly results. Although the chipmaker posted a sixfold jump in earnings, partly aided by a $44 billion gain in asset value, the results failed to meet elevated expectations driven by the AI boom. SK Hynix shares fell more than 14%, while Samsung Electronics dropped 10%.
The two companies account for nearly half of the Kospi's weight and contributed roughly two-thirds of the index's gains earlier this year.
Capitalmind Mutual Fund CEO Deepak Shenoy on Thursday said South Korea's stock market correction reflects the risks of leveraged momentum investing and warned that debt-fuelled bets - not weak corporate earnings - could inflict the biggest damage as markets reverse.
South Korea's Kospi index slumped more than 11% on Wednesday, and 43% from its June peak of 9,386 to 5,311.77. The decline came as heavyweight chipmakers SK Hynix and Samsung Electronics came under intense selling pressure despite reporting strong earnings.
Don't Miss: Black Tuesday for KOSPI: South Korea's stock market crashes 11%; Samsung, SK Hynix lead rout
'GET OUT WHEN THE MOMENTUM'S LOST'
Commenting on the selloff, Shenoy wrote on X that investors chasing momentum should know when to exit.
"Rough move on the KOSPI, which went from 3000 to nearly 10,000 and is now at 5500. If you play momentum, you have to get out when the momentum's lost. You will still make out very decently if you don't go bonkers at the top."
The investor attributed much of the correction to excessive leverage among retail investors. The issue was with individuals in Korea taking leverage and participating when the markets were riding high, he added.
"3x levered single stock ETFs has to be the most clinically insane thing to do, just pure gambling. And then people borrowed money to buy these ETFs!"
Must Read: Kospi plunges, trading halted: Why South Korean market is seeing extreme volatility
INDIA HASN'T SEEN A SYSTEMIC MOMENTUM RISK YET
Drawing a comparison with India, Shenoy said domestic regulators have not permitted similar leveraged products, though margin-funded investing has been growing.
The CEO said that the Indian regulators don't allow it, but then there is hidden leverage too - MTF (Margin Trade Funding) is growing. "However, India hasn't seen a major momentum move in stocks that will create a systemic issue yet."
'GOOD EARNINGS, FALLING STOCKS'
Shenoy argued that the decline in South Korea's leading chipmakers reflected changing market sentiment rather than deteriorating business fundamentals.
"The big boys in the memory world like SK Hynix, Samsung etc are falling not because their results aren't good - the results are brilliant. Yet, when prices fall through good earnings, you can almost tell that the momentum rise is done."
He said the larger concern lay in leveraged positions built around these stocks. According to him, the next complexity isn't Hynix or Samsung; "these are going to be cash-rich. But the problem is in debt - the leverage taken by the players that hit these stocks is already getting hit."
Shenoy also cautioned that AI-linked investments financed through leverage could come under pressure if spending on artificial intelligence slows or competition drives down prices.
"The leverage taken by AI players will be a big hit if there is an actual slowdown in AI scale because competitors can bring far lower prices. The game is on."
WHY KOSPI CRASHED
The Kospi, Asia's best-performing equity market this year despite the recent correction, plunged into technical bear market territory after falling more than 43% from its June peak of 9,386.
The selloff followed SK Hynix's quarterly results. Although the chipmaker posted a sixfold jump in earnings, partly aided by a $44 billion gain in asset value, the results failed to meet elevated expectations driven by the AI boom. SK Hynix shares fell more than 14%, while Samsung Electronics dropped 10%.
The two companies account for nearly half of the Kospi's weight and contributed roughly two-thirds of the index's gains earlier this year.