In just a month since regulations were tightened on single-stock leveraged exchange-traded funds (ETFs) with Samsung Electronics and SK hynix as underlying assets, individual investors made net sales of more than 1.7 trillion won across 16 related products. Some, however, noted a "balloon effect," with the reduced funds shifting to index leverage or overseas leverage products.
According to the Korea Exchange (KRX) on the 30th, from the 31st of last month to the 28th of this month, individual investors made net sales of 1.773 trillion won in 16 single-stock leverage and inverse products tied to Samsung Electronics and SK hynix. That contrasts with the net purchases totaling 15.2876 trillion won from May 27, when the products were listed, to the 30th of last month, before the deposit requirement was raised.
Single-stock leverage grew rapidly after launch amid the strength of domestic semiconductor shares, but trading value fell sharply after the base deposit was raised to 30 million won on the 31st of last month. The trading value of the 16 single-stock leverage and inverse products, which averaged 11.6787 trillion won per day from May 27 to July 30, plunged to 3.1518 trillion won on the first day of the tighter rules on the 31st of last month. On the 28th, it fell to 537 billion won.
So far this month, the average daily trading value came to 1.0059 trillion won. Compared with the average daily trading value from the product launch to right before the tighter rules, it decreased to about one-twelfth.
Earlier, as criticism mounted that single-stock leverage products were increasing volatility in the domestic stock market, financial authorities raised the base deposit from 10 million won to 30 million won starting on the 31st of last month. Since the 19th, paper trading has also been made mandatory when investing in these products. Additional measures, such as expanding the trading lot size by 20 shares, are slated to take effect by November.
Ha Jae-seok, an analyst at NH Investment & Securities, said, "Since August, the net asset value and trading value of single-stock leverage have decreased and the concentration in semiconductors has eased," adding, "As the earnings momentum of Samsung Electronics and SK hynix has also slowed, conditions have formed for the rally that was concentrated in semiconductors to spread to other sectors."
However, there is also analysis that funds exiting single-stock leverage are moving to index leverage or overseas leverage products. In fact, from the 31st of last month to the 28th of this month, high-risk leverage products ranked among the top by trading value, including "KODEX Leverage" (No. 2), "KODEX KOSDAQ 150 Leverage" (No. 6), and "KODEX 200 Futures Inverse 2X" (No. 7).
The situation is not much different for "Korean retail investors trading U.S. stocks" who invest in U.S. equities. From the 3rd to the 28th, they made net purchases of $187.37 million (about 258.7 billion won) in "ProShares UltraPro QQQ (TQQQ)," which seeks three times the daily return of the Nasdaq-100 Index in the United States. It was the sixth-largest net purchase among U.S. stock picks by domestic individual investors.