It turned out that individual investors went on a buying spree of about 450 billion won in a single day on the 24th, snapping up 14 single-stock leveraged exchange-traded funds (ETFs). This came after three straight days (July 21–23) of a total net sell-off of 500 billion won.

To stabilize the market for single-stock leveraged products, the government raises the minimum margin from 10 million won to 30 million won in cash only and improves the rules so that substitute securities sold are not recognized as margin until the cash is deposited. Starting on the 31st, new investments and additional purchases are allowed only if holdings exceed 30 million won in cash, and the minimum margin requirement cannot be relaxed even within a set period after a transaction. The photo shows Samsung Electronics' share price on the board in the Hana Bank dealing room in Jung-gu, Seoul. /Courtesy of News1

On the 26th, according to the Korea Exchange (KRX) and KOSCOM CHECK, individual investors recorded three consecutive days of net selling of 14 single-stock leveraged products from the 21st to the 23rd. The combined net sell amount for the 14 products was 547.17138 billion won.

The net-selling trend among individual investors completely reversed on the 24th. In just that one day, individual investors posted net purchases of 103.8959 billion won across seven Samsung Electronics single-stock leveraged products and 350.02688 billion won across seven SK hynix single-stock leveraged products.

The total net purchases of Samsung Electronics and SK hynix single-stock leveraged products in one day reached 453.83647 billion won.

This net buying occurred on a "Black Friday" when the KOSPI fell more than 5%, and Samsung Electronics and SK hynix closed down 7%–8%. On the 24th, Samsung Electronics and SK hynix closed down 7.59% and 8.34%, respectively. As a result, single-stock leveraged products based on these two stocks as underlying assets also plunged 15%–16%.

Except for KODEX SK hynix Single-Stock Leverage (13,015 won), prices for 13 products slipped to the 11,000–12,000 won range. Compared with the listing-day price of 20,000 won on May 27, prices have effectively been cut in half.

The sharp drop in prices of single-stock leveraged products appears to have drawn in bargain hunters. Also, with a hike in the minimum deposit set to take effect on the 31st, demand likely emerged from individual investors seeking to "average down" before the tighter rules kick in.

In investor communities, many posts read, "I'm selling inverse and increasing leverage with the idea of averaging down when it falls," and, "If the deposit goes up, it will be harder to buy, so if you're going to average down, you have to do it now."

Meanwhile, the Financial Services Commission said on the 24th that it would bring forward to the 31st the strengthening of the minimum deposit requirement, which had initially been slated for August. Starting on the 31st, only those holding more than 30 million won in cash will be able to newly invest in or add to domestic and overseas single-stock leveraged products.

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