"Retail investors in Samsung Electronics and SK hynix have not yet capitulated"... IB says this is not the bottom yet

[Financial News] A global investment bank has found that domestic retail investors in South Korea suffered losses of about 56.3 trillion won from leveraged exchange-traded fund (ETF) investments. Despite the sharp drop in stock prices, the balance of so-called “debt investing” through margin loans still exceeds 32 trillion won, raising concerns about greater market volatility.

According to the IB industry on the 30th, Mohamed Afabayi, head of Asia-Pacific trading strategy at Citigroup Global Markets Securities, said in a report to institutional investors the previous day that “the market capitalization of Korea’s asset-based leveraged ETFs has fallen 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.”
Afabayi estimated the cumulative losses of retail investors at $38.7 billion, or about 56.3 trillion won, and warned that “the market capitalization of leveraged ETF products could fall below $8 billion, or about 11.63 trillion won, before the end of the year.”
Margin loan balances were also cited as a continuing burden on the market. Afabayi said that “as of the 27th, margin loan balances in the KOSPI and KOSDAQ markets stood at 32.7 trillion won,” adding that “although that is down from 38.6 trillion won recorded on the 24th of last month, only about 65% of this year’s margin loan positions are estimated to have been liquidated.”

Meanwhile, even during the stock market downturn, domestic retail investors were found to have continued buying heavily into large-cap semiconductor stocks.
According to the report, retail investors net bought more than $16 billion worth of SK hynix shares since the 23rd of last month, but suffered losses of about $5.7 billion, or 8.3 trillion won, on those purchases. They also posted losses of about $2.4 billion, or 3.5 trillion won, in Samsung Electronics.
Despite the massive losses, Afabayi said retail investors have not yet begun to sell in earnest. He assessed that the KOSPI has only moved out of a short-term overheated phase and has not yet entered an undervalued range where it could form a bottom.
[email protected] Sung Min-seo Reporter