Kosdaq Jumps More Than 30% From July Low as Curbs on Chip Leverage ETFs Redirect Cash

Tighter rules on leveraged exchange-traded funds tied to South Korea’s large semiconductor stocks are pushing investor money into the Kosdaq market.

Bloomberg reported on Aug. 10 that the Kosdaq Index rose as much as 6.8% intraday. The gauge has climbed more than 30% from its low on July 30. A sharp jump in Kosdaq futures prompted the Korea Exchange to trigger a sidecar for the third time this month, temporarily suspending the validity of program buy orders.

Market participants say money leaving single-stock leveraged ETFs tied to Samsung Electronics Co. and SK Hynix Inc. is flowing into Kosdaq shares. Financial authorities recently tightened regulations on the products, including raising the minimum deposit requirement, to curb excessive leveraged bets by retail investors.

Park Woo-yeol, a global ETF analyst at Shinhan Securities, said inflows into the Kosdaq surged on Aug. 10. Retail investors with an appetite for volatility who had moved into single-stock leveraged ETFs are returning to the Kosdaq market, he added.

South Korean stocks had earlier undergone a sharp correction as global sentiment around artificial intelligence investments weakened. Margin trading liquidations and a decline in leveraged ETF trading followed. Since the new rules took effect, investor attention has shifted to small- and mid-cap growth stocks, helping the Kosdaq rebound.

The Kosdaq Index rose 11% last week, while the Kospi Index fell 5.1%. The Kosdaq’s relative return versus the Kospi reached its highest level since the dot-com bubble in 2000.