"Korean retail investors lost 56 trillion won on leveraged bets in Samsung Electronics and SK hynix"

Citi estimated that domestic individual investors lost about $38.7 billion, or 56.3 trillion won, from investing in single-stock leveraged exchange-traded funds (ETFs) during the recent stock market correction.
According to the financial investment industry on the 29th, Citigroup Global Markets Securities issued a market report for institutional investors the previous day and made the estimate. The report was reportedly not an official Citi research note, but a market commentary provided to institutional investors by the head of Asia-Pacific trading strategy at Citi Securities.
Citigroup Global Markets Korea Securities Limited said the market capitalization of leveraged ETFs based on Korean assets fell from about $52.5 billion, or 76.37 trillion won, on the 22nd of last month to about $19 billion, or 27.64 trillion won, recently.
It added that although the market cap of leveraged ETFs had dropped by about $33.5 billion, or 48.7 trillion won, from its peak, new creations worth $6.2 billion, or 9.02 trillion won, were made afterward. Based on that, it estimated total losses for retail investors at about $38.7 billion.
By underlying asset, the largest decline in market capitalization was seen in leveraged ETFs tied to SK hynix. Their market cap fell by about $17 billion from the peak. This was followed by KOSPI 200 Index-linked products, down $10.5 billion, and Samsung Electronics-linked products, down $5 billion.
The head of Asia-Pacific trading strategy said, "The market cap of leveraged ETF-related products could fall below $8 billion before the end of the year."
Citigroup Global Markets Korea Securities Limited said only about 65% of the margin loan positions accumulated since the start of the year have been unwound, adding that the outstanding balance remains high. It also noted that the correlation between the KOSPI 200 Index and margin loan balances reached 92.2%, showing that borrowing to invest tends to rise during market rallies and fall during downturns.
The head of Asia-Pacific trading strategy said, "It is too early to turn optimistic on the KOSPI because individual investors have not yet begun to capitulate."
According to Citi's bubble indicator, the Korean stock market has moved down from the previous "overheated" range to the boundary between "overvalued" and "fair value." However, Citi said it has not yet entered undervalued territory.
[email protected] Lim Sang-hyuk Reporter