A mobile device shows instructions before investing into a leveraged stock product on July 30.NEWS1
Korean investors’ appetite for leveraged products shows little sign of fading.
Leveraged products accounted for more than 40 percent of Korean investors’ trading in major U.S. securities this month, according to data from state-managed financial institution on Wednesday.
Trading in regulated domestic single-stock leveraged products has plunged, but investors have shifted to overseas sector funds, including exchange-traded funds (ETF) offering triple exposure to U.S. semiconductor indexes.
Korean investors traded $16.02 billion worth of their50 most heavily traded U.S. securities from Aug. 1 through Tuesday, after the minimum deposit for single-stock leveraged ETFs was raised to 30 million won ($21,500), according to the Korea Securities Depository’s Securities Information Broadway portal.
Of that amount, leveraged products accounted for $6.95 billion, or 43.4 percent. The settlement figure, which combined purchases and sales, serves as an indicator of which products Korean investors traded most heavily.
The shift toward leverage is even more pronounced compared to the same period a year earlier. Total settlement volume for the top 50 U.S. securities among Korean investors fell 11.7 percent to $16.02 billion from $18.14 billion.
However, Korean investors’ settlement volume for leveraged products rose 8.9 percent, from $6.38 billion to $6.95 billion.
In particular, leveraged products tied to U.S. stocks and stock indexes, excluding those linked to cryptocurrencies, volatility and bonds, saw their share of trading climb 15.6 percentage points, from 27.8 percent last year to 43.4 percent this year.
In other words, even as overall settlement volumein Korean investors' top 50 U.S. securities declined, both the trading volume and share of equity-based leveraged products among Korean investors increased.
A mobile device displays price swings in single-stock leveraged products tied to a chipmaker at a trading room in central Seoul on July 24.NEWS1
In Hong Kong, settlement volume for a product offering twice the daily return of SK hynix reached $15.79 million, while a product offering twice the daily return of Samsung Electronics recorded $6.95 million. Together, the two accounted for $22.75 million, or 12.4 percent of total settlement volume among the Hong Kong market’s top 50 securities.
Market observers say the tighter rules have produced a “balloon effect,” with demand squeezed out of single-stock leveraged products only to resurface in sector-based funds.
The higher deposit requirement applies to single-stock leveraged products at home and abroad, while sector funds such as SOXL are exempt from the new 30 million won deposit threshold.
“The leveraged market is expanding globally, and recent sharp swings in semiconductor stocks have kept demand strong among investors seeking high returns through leveraged products,” Park Sang-hyun, a researcher at iM Securities, said. “The barrier to investing in single-stock leveraged products has risen, but investors’ appetite for risk has not diminished. As a result, the high volatility in the Korean stock market is likely to persist for some time.”
Starting Wednesday, retail investors making new investments in single-stock leveraged products at home or abroad must complete simulated trading in addition to meeting the minimum deposit requirement and completing advance education.
They must participate in simulated trading for at least one hour a day over a minimum of five trading days — for a total of at least five hours.
Brokerages will also face tighter requirements for managing the deviation between market prices and indicative values for all ETFs and exchange-traded notes. The management threshold for domestic products will be tightened to 2 percent from 3 percent, while that for overseas products will be adjusted to 5 percent from 6 percent.
BY KIM DA-YOUNG [lee.soojung1@joongang.co.kr]
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
