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Sixteen single-stock leverage products tied to Samsung Electronics and SK hynix, including two inverse products, drew about 7 trillion won over one month, according to data.
From June 16 to July 15, a total of 7.3364 trillion won flowed into the 16 single-stock leverage and inverse products, according to the Korea Exchange (KRX) and ETF CHECK on the 18th.
By product, 3.4472 trillion won flowed into the “KODEX SK hynix Single-Stock Leverage,” the largest amount among all exchange-traded funds (ETFs). It was followed by the “KODEX Samsung Electronics Single-Stock Leverage” (1.5083 trillion won) and the “TIGER SK hynix Single-Stock Leverage” (1.4271 trillion won), which ranked second and third. The “TIGER Samsung Electronics Single-Stock Leverage” saw net inflows of 693.8 billion won.
Money continued to pour into single-stock leverage products over the month even as the shares of the underlying stocks, Samsung Electronics and SK hynix, declined. From June 16 to July 16, SK hynix fell 19.49% and Samsung Electronics fell 24.33%. During the same period, the KODEX SK hynix Single-Stock Leverage and the KODEX Samsung Electronics Single-Stock Leverage, which recorded the largest net inflows, dropped 45.60% and 48.44%, respectively.
Much of the money that went into single-stock leverage products is believed to have come from retail investors. Over the month, individual investors net-purchased 4.2386 trillion won across seven SK hynix single-stock leverage products and a total of 1.6119 trillion won across seven Samsung Electronics single-stock leverage products. Foreign investors also net-purchased 859.5 billion won and 724.2 billion won respectively, but far less than individuals. Institutions were net sellers of 5.1713 trillion won and 2.2671 trillion won.
Raising the Leverage Threshold
As criticism mounted that the heavy concentration of retail investors’ money in single-stock leverage products was increasing market volatility, financial authorities announced security measures on the 16th to tighten investment requirements.
Starting on the 5th of next month, the basic deposit required to invest in single-stock leverage products will rise from the current 10 million won to 30 million won. The trading unit will also be provisionally expanded to 20 shares at a time going forward. The implementation is scheduled for November.
In addition, the training time required to invest in single-stock leverage products will increase from the current two hours to three hours, and new listings of single-stock leverage products will be provisionally suspended until the market stabilizes. Advertising and marketing will also not be permitted for products already in trading.
If investment demand declines due to the tightened deposit requirements, the combined market capitalization of single-stock leverage products, which reaches 12 trillion won, is expected to shrink to between 4 trillion won and 5 trillion won.