KOSPI Plunges 9.99% After ETF Approval Error; Bitcoin Falls

South Korea’s benchmark KOSPI fell 9.99% to 8,203.84 on Tuesday, triggering an automatic 20-minute trading halt after the Financial Supervisory Service acknowledged it had rushed approval of leveraged exchange-traded funds tied to Samsung Electronics and SK Hynix. Bitcoin slipped below $63,000.

Samsung Electronics and SK Hynix each lost more than 12% as foreign investors reduced exposure to semiconductor shares. The two companies account for more than half of the KOSPI’s market value. The index had reached a record above 9,100 points on Monday and was about 95% higher year-to-date before Tuesday’s decline.

Sixteen leveraged funds tracking the two firms launched in late May. Combined assets rose from roughly $3 billion at launch to more than $9 billion, with retail investors holding about 92% of the funds. The products aim to deliver multiples of each stock’s daily performance and must rebalance holdings and derivatives as prices move.

Rebalancing can force large buy or sell orders as funds adjust exposure. Investment banking estimates indicated a 5% swing in Korean equities could generate roughly $4.7 billion in dealer rebalancing flows, about one-eighth of normal daily share turnover. Retail investors had accumulated about 60 trillion won, or $39 billion, in margin borrowing by the end of May.

Selling spread across Asia as US technology shares weakened and expectations grew that interest rates could remain elevated. The MSCI Asia-Pacific index fell about 2.9% and Japan’s Nikkei 225 declined roughly 3%.

Bitcoin fell as traders cut risk exposure and leveraged crypto positions were closed. The cryptocurrency dropped as much as $1,500 in a few hours to trade near $62,300 after an intraday low around $62,000. Exchange data showed roughly $190 million in crypto positions liquidated within an hour and about $714 million over 24 hours, with long positions accounting for most forced closures. US-listed spot Bitcoin ETFs recorded a rolling 30-day net outflow of about $6.35 billion.

Financial Supervisory Service Governor Lee Chan-jin acknowledged the regulator “acted too quickly” in permitting the leveraged ETFs and expressed regret for not blocking their introduction. Regulators said they are considering stabilization measures, including limits on leverage, tighter eligibility rules, or restrictions on new funds.

Some market participants noted the timing does not prove a direct causal link between the KOSPI rout and Bitcoin’s drop; both markets experienced declines amid weaker technology shares and a broader retreat from risk-sensitive assets.