2x Is Not Enough: Korean Individual Investors Investing in Overseas Stocks Bought 550 Billion Won of 3x Korea Index Leverage

[Financial News] Domestic investors are actively trading even the U.S.-listed 'Korea 3x leveraged exchange-traded fund (ETF)' to bet on a rise in the Korean stock market. Although investors can also buy leveraged products at home that track twice the gain of the KOSPI 200 Index, demand has emerged for higher multiples in the U.S. market.
According to Save-ro, the securities information portal of KSD, on the 26th, domestic investors' purchase settlement amount for the Direxion Daily MSCI South Korea Bull 3X Shares ETF (KORU) reached $397.26 million from July 26 to the 25th of this month, ranking ninth among all overseas stocks. Converted simply at an exchange rate of 1,400 won per dollar, that comes to about 556 billion won.
KORU is a U.S.-listed ETF that tracks three times the daily return of the MSCI Korea Index. In effect, domestic investors are converting won into dollars and making leveraged bets on a further rise in the Korean stock market from the U.S. market. As Korean equities have strengthened and volatility has also increased, aggressive demand for higher returns appears to have spread to overseas-listed products.
Investors can also trade representative leveraged ETFs at home that track twice the gain of the KOSPI 200 Index. Over the same period, individuals bought a net 38.1 billion won of KODEX Leverage ETF and 1.5 billion won of TIGER Leverage ETF. Combined, the two products recorded net purchases of about 39.6 billion won. While investors continued to buy domestic 2x leveraged products, some expanded their trading targets to include 3x products in the U.S. market.
There was also movement to buy Korean companies directly in the U.S. market. SK hynix's American Depositary Receipt (ADR) recorded purchase settlements of $506.89 million during the same period, ranking sixth among all overseas stocks. It trailed only Alphabet, Micron Technology, SanDisk Corporation and Tesla. Net purchase settlements also ranked seventh at $190.55 million.
The securities industry also noted that the U.S. ETF market is rapidly absorbing diverse investment demand. Han Su-jin, a senior researcher at Samsung Securities Co., Ltd., analyzed that "while the U.S. ETF market has continued net inflows for 51 consecutive months, Active ETFs are growing by absorbing a wide range of investment demand, including tactical rebalancing and derivatives strategies." Cumulative net inflows into the U.S. ETF market reached $1.23 trillion through July this year.
The range of leveraged products is also expanding quickly. Recently in the U.S., ETFs were newly listed that track twice the daily return of individual stocks such as Micron Technology, Inc. This means investors can increasingly choose the direction and leverage they want across markets, sectors and individual stocks.
However, the higher the leverage, the greater the risk of losses. 2x and 3x leveraged ETFs aim to deliver multiples of daily returns, not cumulative returns over a certain period. In volatile markets with repeated sharp swings, losses can remain even if the underlying index returns to its original level because of compounding effects.
Park Seung-jin, a researcher at Hana Securities, explained that "from the perspective of building an ETF portfolio, it is still necessary to choose strategies with volatility in mind" and added that "even with expectations of a short-term rebound after a correction, semiconductor stocks continue to fluctuate, so it is necessary to use representative index ETFs or flexible management strategies."
[email protected] Choi Doo-seon Reporter