As South Korea’s financial authorities raised the entry threshold for single-stock leveraged exchange-traded funds (ETFs) and exchange-traded notes (ETNs) tied to Samsung Electronics and SK Hynix, margin trading on the two stocks’ underlying shares is rapidly reviving. Some leveraged capital that lost its outlet due to the new rules appears to be migrating into spot-market margin loans.<\/p>\n
According to Koscom on August 18, Samsung Electronics’ average daily new margin loan volume surged 52.3% from 2,487,364 shares in July to 3,788,924 shares through August 14. SK Hynix also climbed 25.5% over the same period, from 526,625 shares to 660,707 shares.<\/p>\n
The share of new margin trades as a proportion of total trading volume also rose. The average contribution rate for Samsung Electronics jumped from 9.12% in the July 20\u201330 period just before the regulation took effect to 12.74% this month, while SK Hynix rose from 10.06% to 12.28%. Outstanding margin balances as of August 14 increased 8.2% for Samsung Electronics and 7.6% for SK Hynix compared with July 31.<\/p>\n
The timing aligns precisely with the regulatory rollout. Starting July 31, South Korean financial authorities required retail investors making new or additional purchases of domestic and overseas single-stock leveraged products to deposit 30 million won (approximately $21,000) in cash as base margin, no longer accepting substitute securities such as stocks, ETFs, or bonds. On August 4, when trades from the implementation date were reflected on a settlement basis, Samsung Electronics’ new margin loans hit 8.1 million shares \u2014 the highest among the 20 trading days analyzed \u2014 while SK Hynix reached 978,000 shares.<\/p>\n
On the flip side, single-stock leveraged trading has cooled rapidly. Combined daily trading value across the 16 products plunged 93.2% from 12.45 trillion won (approximately $8.8 billion) on July 30, the day before the regulation, to 845.2 billion won (approximately $598.5 million) on August 7. This suggests that some speculative demand exiting these products has shifted to other vehicles, including spot margin on the underlying assets or index-based leveraged products. The low-price appeal of the two stocks following July’s sharp decline is also cited as a factor reigniting margin borrowing.<\/p>\n
The regulatory bar rises further starting August 19. Retail investors newly investing in domestic or overseas single-stock leveraged products must, in addition to the base deposit and pre-education requirements, complete at least one hour of simulated trading per trading day for a minimum of five trading days, totaling at least five hours. ETF and ETN premium\/discount management will also be strengthened the same day. If spot margin expands again after the additional rules, it will serve as a second test of whether leveraged demand is finding workarounds.<\/p>\n
Meanwhile, despite single-stock leveraged ETFs rallying sharply this month, retail investors are exiting in droves. According to the Korea Exchange, from July 31 \u2014 when the tightened rules took effect \u2014 through August 18, the 14 single-stock leveraged ETFs tied to Samsung Electronics and SK Hynix posted average gains of 54.44% and 42.43%, respectively. Yet retail investors net sold 1.67 trillion won (approximately $1.2 billion) of these products over the same period. Retail investors have effectively been sidelined from products designed to maximize returns.<\/p>\n
Foreign investors showed a similar pattern. Foreigners net bought 1.23 trillion won (approximately $869.3 million) of single-stock leveraged products from their launch until just before the regulatory tightening, but net sold 170.9 billion won (approximately $121.0 million) afterward. Institutions absorbed their selling. Institutions sold 17.09 trillion won (approximately $12.1 billion) worth before the tightening but bought 1.82 trillion won (approximately $1.3 billion) afterward.<\/p>\n
Trading volume in single-stock leveraged ETFs has also shrunk dramatically. Average daily trading value across the 14 products fell more than tenfold from 9.29 trillion won (approximately $6.6 billion) between launch and July 30 to 911.3 billion won (approximately $645.3 million) from July 31 through August 18.<\/p>\n
Lee Sang-heon, an analyst at iM Securities, said: “Rather than aggressive selling by investors, it appears that existing holders either couldn’t withstand further declines or took partial stop-losses at rebound points. Investment capital itself shrank significantly after the late-July plunge, leaving investors short of ‘ammunition’ to buy leveraged products anew.”<\/p>\n
Additional inflows into single-stock leveraged ETFs are expected to remain elusive for the time being. Investors who suffered heavy losses would need a strong rebound to offset them, but macro headwinds persist, including U.S. Treasury yields surging to their highest levels. The higher base deposit requirement and mandatory simulated trading add further entry barriers.<\/p>\n
“Existing investors will need time to recover their risk appetite and investment capacity, but Samsung Electronics and SK Hynix are expected to trade in a range for now,” Lee said. “With global long-term bond yields rising and multiple valuation headwinds for equities, a sustained uptrend will be difficult in the near term.”<\/p>\n
Securities industry analysts see expectations building for the two companies beyond simple earnings improvement, centered on strengthening AI memory leadership. For Samsung Electronics, rising general-purpose DRAM and NAND prices, expanded mass production of high-bandwidth memory (HBM) 4, and improved yields on leading-edge DRAM are fueling expectations of HBM market share recovery. For SK Hynix, normalization of HBM4 shipments and expansion of long-term supply agreements (LTAs) are cited as factors underpinning high profitability.<\/p>\n
Sohn In-jun, an analyst at Eugene Investment & Securities, said: “Samsung Electronics is seeing a simultaneous recovery in memory pricing power and HBM competitiveness. SK Hynix is also entering a phase of improved earnings visibility based on HBM4 and LTAs.”<\/p>\n","protected":false},"excerpt":{"rendered":"As South Korea’s financial authorities raised the entry threshold for single-stock leveraged exchange-traded funds (ETFs) and exchange-traded notes…\n","protected":false},"author":2,"featured_media":124379,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[9984,27706,38065,337,10289,15259,276,40757,241,275,45408],"class_list":["post-124378","post","type-post","status-publish","format-standard","has-post-thumbnail","category-sk-hynix","tag-eugene-investment-securities","tag-high-bandwidth-memory-hbm","tag-im-securities","tag-korea-exchange","tag-koscom","tag-margin-loans","tag-samsung-electronics","tag-single-stock-leveraged-etfs","tag-sk","tag-sk-hynix","tag-south-koreas-financial-authorities"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/124378","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=124378"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/124378\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/124379"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=124378"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=124378"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=124378"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}