Korean retail investors purchased leveraged exchange-traded funds as their top choice in both domestic and US markets during the week from May 30 to June 6, Korea Securities Depository data showed on the 8th. The purchases occurred during a global semiconductor correction driven by concerns over AI industry returns. Asset managers warned that leveraged products risk significant losses from negative compounding in volatile conditions.
Korean Investors Purchase $200M in SOXL Leveraged ETF
Korean investors' top US stock purchase was Direxion Daily Semiconductor Bull 3X ETF (SOXL) with $200 million in net purchases during the period, according to Korea Securities Depository's Seibro system. The product tracks three times the daily returns of the Philadelphia Semiconductor Index. Roundhill T-REX 2X Long DRAM Daily Target ETF (RAM) ranked third with $84.91 million in net purchases. RAM tracks twice the returns of Roundhill Memory ETF (DRAM), which holds memory semiconductor companies including Samsung Electronics, SK Hynix, Micron, and SanDisk. The product recorded the largest first-day trading volume in US leveraged ETF history at $385 million on May 24 local time. Direxion Daily MSCI South Korea Bull 3X ETF (KORU), which tracks three times the Korean stock market, recorded $77.87 million in net purchases, ranking fifth among Korean investors' US stock choices.
Domestic Market Records 686 Billion Won in SK Hynix Leverage Purchases
Korean domestic investors concentrated purchases in leveraged products, with all top five net purchases being leveraged ETFs according to ETF Check. KODEX SK Hynix Single Stock Leverage received 686 billion won in net purchases, ranking first. KODEX Samsung Electronics Single Stock Leverage recorded 388.6 billion won in second place, while TIGER SK Hynix Single Stock Leverage attracted 322.2 billion won in third place.
Leveraged ETF Returns Drop to -20% Range
The ETF products experienced returns falling as low as the -20% range during the period of global semiconductor correction. Samsung Electronics leverage products, which performed relatively better, still recorded -7.96% returns. Market expectations that Samsung Electronics' second-quarter earnings announcement would serve as a turning point proved incorrect, as the stock price declined even after the company announced record-high performance results.
Asset Managers Issue Warnings on Negative Compounding Risks
An asset management company official stated that "strong confidence in the semiconductor industry's future growth among individual investors has led to net purchase inflows into leveraged ETFs during the recent correction phase to maximize returns." The official continued, "in highly volatile market conditions like the current situation, holding leveraged products long-term can result in significant losses due to the negative compounding effect," adding that "leveraged products should not become long-term investment vehicles based on belief in semiconductors' long-term vision, but should be used restrictively only for short-term trading purposes when there is short-term confirmation of direction." Lee Sang-hyun, a Meritz Securities researcher, stated that "caution is needed in (leveraged ETF) investment as volatility remains high from market supply and demand aspects such as end-of-quarter rebalancing pressure, amid the extreme continuation of market behavior centered on semiconductors since last year."
FAQ
What did Korean investors purchase most in US stocks from May 30 to June 6?
Korean investors purchased Direxion Daily Semiconductor Bull 3X ETF (SOXL) as their top choice with $200 million in net purchases, according to Korea Securities Depository data released on the 8th.
Why are asset managers warning about leveraged ETF investments?
Asset managers warn that holding leveraged products long-term during highly volatile market conditions can result in significant losses due to negative compounding effects, and recommend using them only for short-term trading when direction is confirmed.
What returns did leveraged semiconductor ETFs record during the correction?
Leveraged ETF returns fell as low as the -20% range during the period from May 30 to June 6, with Samsung Electronics leverage products recording -7.96% returns despite being among the better performers.
