Retail 'battle ants' piled into leverage…down 26% in two days, left reeling
Summary
- It reported that retail investors net bought leveraged KOSPI·KOSDAQ ETFs totaling 700 billion won on the 3rd alone.
- It said leveraged ETFs such as KODEX Leverage and KODEX KOSDAQ 150 Leverage recorded declines of around 26% over two days as the index plunged.
- It noted that brokerages advised that, despite short-term volatility, this selloff could be used as an opportunity to increase investment in market leaders.
Forecast Trend Report by Period
KOSPI·KOSDAQ leverage
Net buying of 700 billion won on the 3rd alone
If weakness persists, losses could 'snowball'
Individual investors who had been boldly betting on leveraged exchange-traded funds (ETFs) while chanting “buy the dip” amid a market rout are now being put to the test. As the KOSPI and KOSDAQ extended declines for a second straight day, concerns are growing that losses for these so-called “battle ants” could snowball.
According to ETF Check on the 4th, the top two names for individuals’ net buying the previous day were 'KODEX Leverage' (462.5 billion won) and 'KODEX KOSDAQ 150 Leverage' (231.0 billion won). These products aim to deliver twice the return when the index rises.
Even as the KOSPI and KOSDAQ plunged on heightened Middle East tensions and a wave of foreign selling, retail investors instead treated the drop as an aggressive buying opportunity. Their conviction in semiconductor shares also remained firm. 'TIGER Semiconductor TOP10 Leverage', which seeks to deliver twice the returns of semiconductor names such as Samsung Electronics and SK hynix, saw net inflows of 134.6 billion won to rank fourth. It was followed by 'TIGER Semiconductor TOP10' (129.5 billion won).
While the drop was steeper than in overseas markets, domestic liquidity still flowed toward “Korean equities.” According to FnGuide, assets under management in domestic equity ETFs jumped by 2.1870 trillion won the previous day, while overseas equity ETFs fell by 51.8 billion won.
The question, however, is what comes next. As the KOSPI and KOSDAQ continue their steep slide, losses are mounting quickly for investors who scooped up leveraged products the previous day. Given the structure of leveraged ETFs—which target twice the daily return—even another day or two of declines could push losses into double digits in short order. In fact, leveraged ETFs tracking the KOSPI 200 posted declines of around 26% over the two days since the 3rd.
Market volatility has increased, but the brokerage industry is maintaining a constructive view on the medium- to long-term direction. Jo Ah-in, an analyst at Samsung Securities, advised that “while it’s true short-term uncertainty has risen, this selloff can be used as an opportunity to increase investment in market leaders.”
Reporter Yang Ji-yoon yang@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
