▲ Samsung Electronics, SK Hynix
It has been found that 16 leveraged and inverse exchange-traded funds (ETFs) tracking Samsung Electronics and SK Hynix as single stocks have attracted approximately 7 trillion won in capital over the past month.
Attention is now focused on whether the influx of investors will decrease as financial authorities significantly raise the entry barriers for single-stock leveraged products to reduce stock market volatility.
According to the Korea Exchange and ETF CHECK on July 17, a total of 7.3364 trillion won in capital flowed into 16 single-stock leveraged and inverse products from June 16 to July 15.
By product, the KODEX SK Hynix Single Stock Leverage ETF saw an inflow of 3.4472 trillion won.
This is the largest scale among all listed ETFs.
It was followed by the KODEX Samsung Electronics Single Stock Leverage (1.5083 trillion won) and the TIGER SK Hynix Single Stock Leverage (1.4271 trillion won), which ranked second and third, respectively.
The TIGER Samsung Electronics Single Stock Leverage saw a net inflow of 693.8 billion won.
Despite significant drops in the stock prices of the underlying assets, Samsung Electronics and SK Hynix, capital continued to pour into these single-stock leveraged products.
From June 16 to July 16, SK Hynix fell by 19.49%, and Samsung Electronics dropped by 24.33%.
During the same period, the KODEX SK Hynix Single Stock Leverage and KODEX Samsung Electronics Single Stock Leverage, which saw the largest net inflows, fell by 45.60% and 48.44%, respectively.
It is understood that a significant portion of the capital flowing into single-stock leveraged products came from retail investors.
Over the past month, retail investors net purchased a combined 4.2386 trillion won of the seven SK Hynix single-stock leveraged products and 1.6119 trillion won of the seven Samsung Electronics single-stock leveraged products.
Foreign investors also net purchased 859.5 billion won and 724.2 billion won, respectively, but this was significantly less than the retail volume.
Institutional investors were net sellers, with 5.1713 trillion won and 2.2671 trillion won in net sales, respectively.
As concerns grew that the concentration of retail capital into single-stock leveraged products was increasing market volatility, financial authorities announced supplementary measures on July 16 to tighten investment requirements.
Starting August 5, the basic deposit requirement for investing in single-stock leveraged products will increase from the current 10 million won to 30 million won.
The current practice, where securities firms typically relax basic deposit requirements after three months based on trading experience, will be prohibited.
With the tightening of basic deposit requirements, it is expected that investment demand will decrease, potentially reducing the combined market capitalization of single-stock leveraged products—currently around 12 trillion won—to one-third of its current level, or 4 to 5 trillion won.
The minimum trading unit will also be tentatively expanded to 20 shares in the future.
The implementation is scheduled for this coming November.
For instance, if the price of a single-stock leveraged product is 15,000 won based on the closing price on July 16, at least 300,000 won would be required to purchase 20 shares.
This is higher than the stock price of Samsung Electronics (255,000 won).
In addition, the mandatory education time for investing in single-stock leveraged products will increase from 2 hours to 3 hours, and new listings of such products will be tentatively suspended until the market stabilizes.
Advertising and marketing for products already being traded will also be prohibited.
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