“What’s to become of retail investors?” ... ETF they bought for 1.2199 trillion won plunges 45%

[Financial News] Individual investors who bet on gains in South Korea’s stock market over the past month suffered heavy losses as the KOSPI and KOSDAQ (Korea Securities Dealers Automated Quotations) plunged. Buying was concentrated in leveraged exchange-traded funds (ETFs) that track twice the index gains, but returns on those products fell by more than 40%.

According to financial data provider Yonhap Infomax and the Korea Exchange on the 6th, individual investors were net buyers of 1.2199 trillion won worth of KODEX LEVERAGE between October 6 and November 5. The product tracks twice the daily return of the KOSPI 200 Index and had the highest net purchases by individual investors among ETFs listed in South Korea over the same period.
The product with the second-highest net purchases by individual investors was KODEX KOSDAQ 150 Leverage ETF, at 941.3 billion won. It is an ETF that tracks twice the positive daily change in the KOSDAQ 150 Index.
Buying also continued in leveraged ETFs investing in the semiconductor sector. Samsung KODEX Semiconductor Leverage ETF ranked ninth in net purchases by individual investors, at 257.3 billion won, while TIGER Semiconductor TOP10 Leverage ETF ranked 11th, at 211.3 billion won.
ETFs linked to the KOSPI 200 Index that were not leveraged products were also among individual investors’ purchases. Samsung KODEX 200 ETF attracted net purchases of 826.2 billion won, while Samsung KODEX 200 Target Weekly Covered Call ETF drew 596.4 billion won, ranking third and fourth, respectively.
Bargain-hunting demand following the market downturn is cited as the reason individual investors’ buying was concentrated in index-tracking ETFs. The leveraged ETFs they bought heavily recorded steep losses.
Between October 6 and November 5, KODEX LEVERAGE returned -45.36%. KODEX KOSDAQ 150 Leverage ETF also fell 48.79%.
By contrast, so-called 2x inverse ETFs, which bet on declines in indices, posted high returns. Products seeking returns equal to twice the decline when the KOSPI 200 Index falls ranked among the top performers.
By product, Kiwoom KOSEF 200 Futures Inverse 2X ETF had the highest return, at 62.32%. It was followed by KODEX 200 Futures Inverse 2X at 60.87%, PLUS KOSPI 200 Futures Inverse 2X ETF at 60.28%, and Mirae Asset TIGER 200 Futures Inverse 2X ETF at 60.00%; all posted gains of 60% or more.
2x inverse ETFs that bet on declines in individual stocks posted even higher returns. Shinhan SOL F-SK Hynix Single Stock Inverse 2X surged 71.34%, while PLUS Samsung Electronics Futures Single Stock Inverse 2X jumped 63.96%, ranking first and second in gains, respectively.

Meanwhile, on the 5th, the KOSPI closed at 5,383.80, down 300.00 points (5.28%) from the previous trading day. It was the lowest closing level in about seven months, since it recorded 5,337.30 on April 3.
The KOSDAQ also ended trading at 678.41, down 36.54 points (5.11%) from the previous trading day. The last time it closed in the 600s was about three months ago, on July 30 (644.78).

[email protected] Han Seung-gon Reporter