Retail Investors Boost Cash Holdings Ahead of Higher Leverage Deposit Requirements [Are There Measures for Leverage?]

Investor deposits are rising sharply in a short period of time. It is believed that individual investors are rushing to add cash ahead of the higher deposit requirement for single-stock leveraged exchange-traded funds (leveraged ETFs) in order to meet the new threshold.
According to the Korea Financial Investment Association on the 29th, investor deposits stood at 109.1675 trillion won on the 27th. That was up by about 4 trillion won in just one trading day from 105.6371 trillion won on the previous trading day, the 24th. Investor deposits had fallen to 103.8765 trillion won on the 22nd after hitting an all-time high of 139.6948 trillion won on the 4th of last month, but they are rising again.
The sharp increase in deposits over a short period is being interpreted as a sign that some individual investors are building up cash ahead of the increase in the deposit requirement for single-stock leveraged ETFs to 30 million won on the 31st.
In fact, retail enthusiasm for single-stock leveraged ETF investing remains strong. Over the past week, from the 22nd to the 28th, the ETF bought the most by individual investors was the KODEX SK Hynix Single Stock Leverage ETF, which recorded net purchases of 499.6 billion won during the period. In the same period, they also bought 189.5 billion won of the MiraeAsset TIGER SK Hynix Single Stock Leverage ETF and 101.2 billion won of the Samsung Electronics Single-Stock Leveraged ETF.
Market sentiment that the domestic stock market had been corrected too sharply also appears to have affected the increase in investor deposits. The KOSPI (Korea Composite Stock Price Index) hit an intraday high of 8,620.15 on the 1st, but at one point on this day it fell to 5,262.77, marking a maximum correction of 38.95%.
The amount available for short selling is also declining. The balance of securities lending transactions fell by 56.7915 trillion won over about a month, from 195.3006 trillion won on the 15th to 138.5091 trillion won the previous day.
Brokerage firms believe that tightening the rules for leveraged ETFs alone will not have a major impact on reducing volatility in the domestic stock market. Even after the regulatory announcement, retail investors have not yet slowed their buying of leveraged ETFs. Noh Dong-gil, a researcher at Shinhan Investment & Securities, said, "It is possible that the funds concentrated in single-stock leveraged ETFs have already passed their peak, but the decline is still small." He added, "We need to see whether the retail leverage structure is actually unwound after the higher basic deposit requirement takes effect."
[email protected] Lim Sang-hyeok Reporter