Yonhap News
Retail investors have sold a net 1.7 trillion won worth of single-stock leveraged exchange-traded funds tied to Samsung Electronics and SK hynix in the roughly one month since regulators tightened rules on the products. Trading volume has shrunk to one-nineteenth of pre-regulation levels, while some demand appears to be moving into domestic index products and overseas leveraged funds.
Individual investors sold a net 1.773 trillion won worth of 16 leveraged and inverse products tracking Samsung Electronics (005930) and SK hynix (000660) between the 31st of last month, when the minimum deposit requirement for single-stock leveraged products was raised to 30 million won from 10 million won, and the 28th of this month, according to the Korea Exchange on the 30th. Net selling totaled 1.2415 trillion won across eight SK hynix-linked products and 531.6 billion won across eight Samsung Electronics-linked products.
The trend is the reverse of what followed the products’ debut. Individuals bought a net 15.2876 trillion won worth of the 16 products between May 27, when all of them listed simultaneously, and the 30th of last month. They poured 9.9365 trillion won into SK hynix-linked products and 5.3511 trillion won into Samsung Electronics-linked products, channeling large sums into the funds in a short period.
Trading volume contracted rapidly as retail money flowed out. Average daily turnover for the 16 products reached 11.6787 trillion won from their listing date until just before the rules took effect, but fell to 1.059 trillion won this month — one-nineteenth of the pre-regulation level. Daily turnover dropped from 3.1518 trillion won on the 31st of last month, the first day of the new rules, to 537 billion won on the 28th of this month.
The monthly shift was also clear. Average daily turnover rose steadily from 9.2903 trillion won in May to 11.4251 trillion won in June and 12.2735 trillion won in July, before plunging in August as the regulations took hold. Combined net assets of the products grew from 5.0075 trillion won on their listing date to 5.8534 trillion won on the 30th of last month, but that growth has since stalled.
Financial regulators raised the minimum deposit requirement for individual investors to 30 million won from 10 million won effective the 31st of last month, after concerns emerged that excessive inflows into single-stock leveraged products could amplify stock market volatility. Starting on the 19th of this month, first-time investors have also been required to complete simulated trading. Additional measures, including raising the minimum trading unit to 20 shares, are set to take effect later this year.
Demand for leveraged bets has not disappeared so much as shifted to other high-risk products. Between the 31st of last month and the 28th of this month, KODEX Leverage ranked second among all domestic ETFs by average daily turnover at 1.9966 trillion won. KODEX KOSDAQ150 Leverage and KODEX 200 Futures Inverse 2X also ranked among the most heavily traded, at 754.3 billion won and 750.5 billion won respectively.
Overseas leveraged ETFs drew retail money as well. Korean investors bought a net $187.37 million (about 258.7 billion won) worth of the ProShares Ultra QQQ (QLD), which seeks twice the daily return of the Nasdaq 100 index, between the 3rd and 28th of this month. That made it the sixth-largest net purchase by Korean retail investors among U.S.-listed securities during the period.
