Korean retail investors purchased $690.62 million (approximately 1.04 trillion won) of SOXL, a 3x leveraged US semiconductor ETF, from the 1st to the 14th of this month, ranking it first among overseas stock net purchases, according to Korea Securities Depository data released on the 15th. KORU, a 3x leveraged ETF tracking Korean stocks, ranked third with $147.6 million (approximately 221.4 billion won) in net buying during the same period. The surge in leveraged ETF purchases reflects Korean investors' pursuit of short-term high returns through 2x and 3x products in both US and Korean markets, extending beyond index-based products to single-stock leveraged ETFs. On the 14th, the KOSPI index opened 226.08 points (3.30%) higher at 7082.91 and surged over 6% early in the session to reclaim the 7000 level, standing at 7261.18 (up 5.9%) as of 10:15 AM. Financial industry officials and foreign analysts have raised concerns about the risks of herd behavior and heavy leverage use among retail investors driving market movements.
SOXL and KORU Lead Korean Investors' Overseas Stock Purchases
SOXL, which targets 3x the daily returns of the NYSE Semiconductor Index composed of major US semiconductor stocks, recorded $690.62 million in net buying from the 1st to the 14th of this month, 4.4 times the $156.1 million (approximately 234.1 billion won) net buying of second-ranked Applied Materials. KORU, a 3x leveraged ETF betting on Korean stock market gains, attracted $147.6 million in net buying to rank third overall. Korean investors engaged in high-multiple investment in the Korean stock market through US-listed products in addition to domestically listed leveraged ETFs.
Other leveraged products with confirmed net buying included QLD ($105.83 million, approximately 158.8 billion won), a 2x Nasdaq 100 index product, and TQQQ ($30.83 million, approximately 46.2 billion won), a 3x product. RAM, which targets 2x the daily returns of an ETF holding global memory companies including Samsung Electronics, SK Hynix, and Micron, recorded $64.38 million (approximately 96.6 billion won) in net buying to rank 10th overall.
Leveraged ETF Buying Expands to Single-Stock Products
Korean investors' leveraged investment expanded to single-stock products tracking 2x the stock prices of SanDisk, IREN, Oracle, Strategy, and Bloom Energy. Among 11 leveraged ETFs in the top 50 overseas stock net purchases, 6 were single-stock products. While net buying volumes were smaller than 3x index products like SOXL or KORU, the expansion of leveraged investment to stocks with inherently high price volatility indicates a clear preference for risk, according to analysts.
Index-based products are composed of multiple stocks, allowing some diversification of losses from individual company underperformance or unexpected negative news. In contrast, single-stock products directly amplify the price movements of a single company. Even with the same 2x leverage, products based on stocks with high inherent volatility can experience faster loss accumulation than index-based products.
The high-multiple investment demand observed in overseas markets aligns with overheating in the domestic single-stock leveraged ETF market. Korean investors have been buying and selling Samsung Electronics and SK Hynix single-stock leveraged products on an ultra-short-term basis. On the 14th, when the KOSPI threatened the 6400 level intraday, trading volume of 16 Samsung Electronics and SK Hynix single-stock leveraged and inverse ETFs surged 50.5% from the previous day to 18.29 trillion won. This accounted for 39.03% of total ETF trading volume of 46.86 trillion won on that day, up 5.16 percentage points from the previous trading day.
Industry Officials Warn of Herd Behavior and Leverage Risks
The financial investment industry points out that the behavior of repeatedly using leveraged products as a means for short-term profits, rather than the products themselves, should be guarded against. A financial investment industry official stated, "Korean investors are actively purchasing 2x and 3x index products and single-stock leveraged ETFs not only in the domestic market but also in the US market," adding, "When cases of large profits spread, there is a tendency to follow the crowd without sufficiently examining the product structure and loss potential." The official noted, "Leveraged products require getting the direction, timing, and holding period all correct, making it difficult to increase positions to recover losses."
Foreign investors have also expressed concerns about the situation where individual investors' borrowing and leveraged trading are leading the domestic stock market. Alexander Redman, chief equity strategist at CLSA, told Reuters, "Korea remains the largest overweight market, but it is concerning that retail investors are in the driver's seat and they are using a lot of credit."
KOSPI Reclaims 7000 Level on the 14th
On the 14th, the KOSPI index opened at 7082.91, up 226.08 points (3.30%) from the previous session, and surged over 6% early in the session to reclaim the 7000 level after three trading days. As of 10:15 AM, the index stood at 7261.18, up 5.9% from the previous session. As buying from both foreign and institutional investors flowed in, a buy-side circuit breaker was triggered, and semiconductor stocks including Samsung Electronics (up 4.7%) and SK Hynix (up 10.3%) led the index gains. The KOSDAQ also reclaimed the 800 level, indicating a recovery in investor sentiment.
FAQ
What leveraged ETFs did Korean investors purchase the most from the 1st to the 14th of this month?
Korean investors purchased $690.62 million (approximately 1.04 trillion won) of SOXL, a 3x leveraged US semiconductor ETF, ranking it first among overseas stock net purchases from the 1st to the 14th of this month according to Korea Securities Depository data. KORU, a 3x leveraged ETF tracking Korean stocks, ranked third with $147.6 million in net buying.
How much did the KOSPI index rise on the 14th?
On the 14th, the KOSPI index opened 226.08 points (3.30%) higher at 7082.91 and surged over 6% early in the session to reclaim the 7000 level. As of 10:15 AM, the index stood at 7261.18, up 5.9% from the previous session, with Samsung Electronics up 4.7% and SK Hynix up 10.3%.
What concerns have industry officials raised about leveraged ETF trading?
Financial investment industry officials warn that when cases of large profits from leveraged products spread, investors tend to follow the crowd without sufficiently examining product structure and loss potential. Alexander Redman of CLSA expressed concern that retail investors are leading the Korean stock market while using a lot of credit.
