The recent downturn in South Korea's equity market has severely impacted retail investors who heavily invested in single-stock leveraged exchange-traded funds (ETFs) linked to major semiconductor companies. Since their launch on May 27, these ETFs have attracted 14 trillion won ($9.4 billion) from domestic investors, contrasting sharply with the 2 trillion won from foreign investors.
The KODEX SK Hynix Single Stock Leverage ETF has plummeted approximately 70% from its peak in June, causing widespread distress among investors, as evidenced by comments on online trading forums.
Analysts, including Jung In Yun from Fibonacci Asset Management, note that the losses predominantly affect domestic retail investors, many of whom are not novices but rather individuals in their 40s and 50s who have become comfortable with leveraging their investments.
The Bank of Korea has reported a record high in leveraged stock investments among retail investors, raising concerns about potential volatility during market corrections. In response to the situation, South Korean regulators have introduced stricter rules for trading these leveraged ETFs, increasing the minimum cash requirement from 3 million won to 30 million won.
Market experts warn that the current environment may lead to a prolonged slump if the volatility continues, with some suggesting that the semiconductor sector has become overly crowded with both retail and institutional investments