When the Kospi tumbled more than 10% in a single session, retail investors responded by aggressively buying leveraged exchange-traded funds while offloading inverse ETFs. Analysts say the pattern reflects a “learning effect” in which repeated post-crash rebounds have conditioned individual investors to treat sharp declines as buying opportunities.
According to Koscom data, retail investors net purchased 420 billion won ($286 million) worth of the KODEX SK Hynix Single-Stock Leveraged ETF on Tuesday, making it the top retail net-buy ETF for the day. The product fell 28.43% in a single session Tuesday, dragged down by a sharp drop in SK Hynix shares.
Other leveraged ETFs also ranked among the top retail net purchases: the KODEX Kosdaq 150 Leveraged ETF drew 233.2 billion won in net buying, while the TIGER SK Hynix Single-Stock Leveraged ETF attracted 152.3 billion won.
Combined net purchases of the five leveraged ETFs reached 1.1 trillion won, accounting for 25.48% of total retail net purchases on the Kospi that day, which stood at 4.32 trillion won.
The Kospi plunged 10.84%, or 732.09 points, on Tuesday as a selloff in semiconductor stocks threatened to push the index below the 6,000 level. In point terms, the drop was the second largest since June 23. In percentage terms, it was the third largest on record, behind the 12.06% decline on March 4 and the 12.01% drop on Sept. 12, 2001, in the immediate aftermath of the Sept. 11 terrorist attacks.
Retail investors appeared to view Tuesday’s crash as a chance to buy at a discount, placing aggressive bets on leveraged ETFs.
However, the recent plunge is estimated to have significantly deepened cumulative losses for retail investors. In an Asia trading strategy report Tuesday, Citigroup said the balance of domestic underlying-asset leveraged ETFs peaked at $52.5 billion on June 22 before falling to $19 billion.
“What is notable is that new subscriptions continued despite these losses,” Citi said. “An additional $6.2 billion was subscribed after the June 22 peak, which means total estimated losses for retail investors in leveraged ETFs amount to approximately $38.7 billion.”
Profit-taking continued in inverse ETFs, which had surged on Tuesday. Retail investors net sold 144.6 billion won worth of the KODEX 200 Futures Inverse 2X ETF on Tuesday, making it the top retail net-sell ETF for the day.
The KODEX Inverse ETF (71.4 billion won), the SOL SK Hynix Futures Single-Stock Inverse 2X ETF (11.3 billion won), the PLUS Samsung Electronics Futures Single-Stock Inverse 2X ETF (11.3 billion won) and the KODEX Kosdaq 150 Futures Inverse ETF (7.6 billion won) also ranked among the top retail net-sell ETFs.
Market analysts say a “learning effect” has taken hold, with investors increasingly viewing sharp declines as buying opportunities after repeated quick rebounds following crashes. The pattern — buying inverse ETFs during rallies and leveraged ETFs during selloffs — has become a recurring feature of retail trading.
After the Kospi plunged 12.06% on March 4 amid fallout from the US-Iran war, the index rebounded 9.63% on the very next trading day.
“Despite a decline in customer deposits since late last month, retail net purchases of domestic individual stocks and domestic equity ETFs have continued to increase,” said Kim Jae-seung, a researcher at Hyundai Motor Securities. “This should be interpreted as investor funds being depleted through an aggressive buy-the-dip strategy during the downturn that began at the end of last month.”
Market analysts say whether money starts flowing out of leveraged products could serve as a signal for a near-term bottom. “There are cases where investors’ ‘capitulation’ selling marks a short-term low,” said Kang Song-cheol, a researcher at Eugene Investment & Securities. “We are watching to see whether outflows begin from the Samsung Electronics and SK Hynix leveraged products, where capital had been concentrated.”
moon@heraldcorp.com
This content was produced with the assistance of AI translation services.
