From 9,815 Won to 76 Won as “Penny Stock” Looms... Retail Investors Still Flock to Geared Inverse ETFs

Four KOSPI200 Leveraged Inverse ETFs Fall to 70–80 Won Range

All Five Lowest Weekly ETF Returns Are Leveraged Inverse Funds

Retail Investors Continue Net Buying... Caution Urged on Delisting Risk

The price of inverse leveraged 2X (commonly called “geopbus”) exchange-traded funds (ETFs), which bet on falling stock prices, has dropped below 100 won. Despite the stock market’s bullish rally, these products continue to decline endlessly, but retail investors are still net buyers. Industry experts have warned that when an ETF’s market price falls excessively, investor risk may increase and have called for caution.

On the 1st, the current status board at the dealing room of Woori Bank headquarters in Jung-gu, Seoul, displayed the KOSPI. On that day, the KOSPI closed at 8,788.38, up 312.23 points (3.68%) from the previous trading day, setting a new all-time high once again. Yonhap News

According to the Korea Exchange on June 2, as of the previous day, the four KOSPI200 futures inverse leveraged 2X ETFs—KODEX, TIGER, RISE, and KIWOOM—closed in the 70-80 won range. Even the PLUS 200 Futures Inverse 2X, which has the highest price among them, fell to 168 won, reaching “penny stock” status. As the KOSPI index rose by over 3% the previous day, these ETFs—which track -2 times the daily performance of the KOSPI200—fell by 4% to 8%.

Over the past week, the five worst-performing domestic ETFs were all inverse leveraged 2X products. According to ETFCheck, the KODEX 200 Futures Inverse 2X posted a one-week return of -25.49%, the lowest among all ETFs. On the previous day alone, the PLUS Samsung Electronics Futures Single-Stock Inverse 2X recorded the largest one-day decline with a return of -22.81%. This is more than double the drop of the second-place KODEX 200 Futures Inverse 2X, which fell by -9.52%.

Notably, the KODEX 200 Futures Inverse 2X, which closed at 9,815 won on its listing date of September 22, 2016, has now fallen to 76 won. Even in this situation, retail investors continue to buy these inverse leveraged products. Individuals have net purchased 352.5 billion won of the KODEX 200 Futures Inverse 2X over the past month. All four other KOSPI200 futures inverse leveraged ETFs also saw strong individual buying. The PLUS Samsung Electronics Futures Single-Stock Inverse 2X, which was listed on May 27, saw its net assets rise to 61.5 billion won in less than a week.

However, there are significant concerns surrounding these inverse leveraged ETFs. The first is the risk of delisting due to shrinking fund size. Last month, as product prices fell into the 200-won range, some ETFs approached the delisting threshold. For ETFs, if the net asset value (NAV) of a product that has been listed for over a year falls below 5 billion won and remains there at the end of the next semi-annual period, it becomes subject to delisting. As of May 29, according to the Korea Exchange, the NAVs of RISE 200 Futures Inverse 2X, KIWOOM 200 Futures Inverse 2X, and PLUS 200 Futures Inverse 2X were 3.6 billion won, 2.1 billion won, and 1.6 billion won, respectively—all below the 5 billion won mark. None of these products have been designated as “management issues” yet.

Experts have warned that when the price of an ETF drops to “penny stock” levels, the tick size widens and investor risk rises. Nam Yongsoo, Head of the ETF Division at Korea Investment Management, said, “With the current minimum tick size at 1 won, a 1-tick move in a 100-won ETF corresponds to about 1%, making it difficult for the market price to precisely reflect small movements in the underlying index. In such cases, the spread between bid and ask prices can widen, the premium/discount to NAV may temporarily expand, and unfavorable execution prices may occur.” He added, “Investors should not approach these products just because they look cheap. It is crucial to recognize that these are high-risk products tracking -2 times the daily index return and to check for any discrepancies between the market price and iNAV or NAV before investing.”

Industry participants argue that to prevent the emergence of ultra-low or ultra-high price ETFs, face-value consolidation and stock splits should be permitted for ETFs as well. Currently, ETFs are legally categorized as collective investment securities rather than stocks, making it difficult to apply stock split or consolidation rules under the Commercial Act. One asset management industry official stated, “This means that even if an ETF’s price becomes excessively high or low, it cannot have its trading unit adjusted through splits or consolidations like stocks. There have been continuous calls from the industry to introduce a separate split/consolidation system for ETFs to improve investor accessibility and market efficiency.”

This content was produced with the assistance of AI translation services.