Money Leaves KOSDAQ for Leveraged Bets, Leaving Double-Digit Losses Behind

[Financial News] KOSDAQ margin trading has recently declined sharply, while trading in single-stock leveraged ETFs linked to Samsung Electronics and SK hynix has surged. As the two trends emerged at the same time, the market is interpreting them as a sign that short-term funds from individual investors may have moved from small- and mid-cap stocks into leveraged products.
According to the Korea Financial Investment Association on the 11th, KOSDAQ margin loan balances stood at 9.8563 trillion won on May 27, when single-stock leveraged ETFs were listed. The figure then kept falling, reaching 7.7962 trillion won as of the 9th. That marks a drop of about 2.06 trillion won, or 20.9%, in just a month and a half after listing.
The decline became even more pronounced over the past month. KOSDAQ margin balances, which stood at 8.9658 trillion won on the 10th of last month, fell by 1.1696 trillion won, or 13.0%, through the 9th. By contrast, margin balances on the Korea Exchange Main Board rose by 1.0296 trillion won, from 27.8078 trillion won to 28.8374 trillion won over the same period.
The market is viewing the recent decline in KOSDAQ margin balances and the sharp rise in single-stock leveraged ETF trading as part of the same trend. The analysis is that individual investors pulled money out of small- and mid-cap stocks and moved it into leveraged ETFs in search of short-term gains, only to suffer larger losses in the recent sell-off.
According to Korea Exchange data, individual investors were the most active buyers in the overall ETF market, posting net purchases of 22.6476 trillion won from May 27, when single-stock leveraged ETFs were listed, through the previous day. They also accounted for the largest trading volume, with more than 640 million shares. In particular, Samsung Electronics and SK hynix single-stock leveraged ETFs ranked near the top in daily trading value almost every day after listing, drawing concentrated buying from individual investors.
After Samsung Electronics released earnings, the underlying stock corrected and losses in the leveraged ETFs nearly doubled. From July 7, when Samsung Electronics announced preliminary second-quarter results, through July 9, Samsung Electronics single-stock leveraged ETFs accounted for seven of the 10 ETFs with the biggest declines over the three trading days.
What stands out now is KOSDAQ's recent momentum. The KOSDAQ Index closed at 837.43 on the 10th, up 5.47% from the previous session. A buy-side sidecar was triggered on the KOSDAQ market at 1:08 p.m. during the session.
Im Jeong-eun, a researcher at KB Securities, said, "As secondary battery stocks strengthened, EcoPro BM jumped more than 9%, and most sectors except pharmaceuticals ended higher, allowing KOSDAQ to recover the 800 level." She added, "On a weekly basis, KOSPI and KOSDAQ fell by the 7% and 3% ranges, respectively, but sentiment recovered toward the end of the week and the market rebounded."
Some market watchers also say short-term funds that had flowed into leveraged ETFs may now be starting to move back into small- and mid-cap stocks.
A securities industry official said, "The recent decline in KOSDAQ margin balances and the surge in leveraged ETF trading show that individual investors' money has shifted into high-risk products." The official added, "Whether that money returns to KOSDAQ after the single-stock leveraged ETF craze cools will determine the trend for small- and mid-cap stocks in the second half of the year."

[email protected] Choi Du-seon Reporter