KOSDAQ Leverage Soars After Single-Stock Leverage Regulations... Clear Influx of Funds

Following the government's move to raise the entry barrier for single-stock leverage, KOSDAQ index leverage returns have shown a steep surge exceeding 60% from late last month to recently.

According to the Korea Exchange, the top five ETFs in terms of gains from July 31 to August 7 were all KOSDAQ leverage products.

As the KOSDAQ rose for five consecutive trading sessions from July 31 to August 6, leverage products tracking twice the KOSDAQ 150 Index surged.

From July 31 to August 7, the KOSDAQ's increase rate stood at 23.89%, which is double the KOSDAQ's 11.89% increase rate over the same period.

Analysts suggest that the reason the KOSDAQ, which had been sidelined for a while, has maintained an upward trend since July 31 is because single-stock leverage trading, which had been sucking in KOSDAQ liquidity, dropped sharply following tightened regulations.

The capital inflow has also reversed.

From July 31 to August 6, net capital inflows of 423.7 billion won into KODEX KOSDAQ 150 and 181.8 billion won into KODEX KOSDAQ 150 Leverage were recorded, making them the second and fifth largest amounts among all ETFs, respectively.

Park Woo-yeol, a researcher at Shinhan Securities, pointed out, "As 16 types of single-stock leverage absorbed KOSDAQ liquidity, trading value decreased and sluggishness deepened," adding, "Now, due to the decrease in single-stock leverage trading, we can expect a reversal of the oversold position in the KOSDAQ as well."

However, voices are also emerging warning against a balloon effect where funds flock to other index leverage ETFs, such as KOSDAQ leverage, instead of single-stock leverage.

An official from the securities industry pointed out, "While the concentration of funds from single-stock leverage spreading to the KOSDAQ and small-to-mid-cap stocks is positive in terms of easing concentration, moving around leverage products aiming for high returns could rather amplify volatility."
※ Please note: This article was translated by AI and may contain errors.