"Now Is the Chance, Double or Triple on a Rebound" Leveraged ETF Frenzy Despite Semiconductor Correction

Leveraged ETFs Top Net Purchases Domestically and Abroad Over Past Week
Returns Plunge by Up to 20%
"Only for Short-Term Trades When Market Direction Is Clear"

Even amid the global correction in semiconductor stocks, retail investors have continued to purchase leveraged ETFs more than any other products on both domestic and overseas stock markets. This is interpreted as an attempt to “buy the dip” in anticipation of a rebound. Industry experts have advised that, given the heightened volatility, investors should exercise caution.

According to the 'SafeRO' system of Korea Securities Depository on July 8, the most purchased stock by domestic investors in the U.S. market during the one-week period from June 30 to July 6 was the 'Direxion Daily Semiconductor Bull 3X ETF (SOXL)'. This product tracks three times the daily returns of the Philadelphia Semiconductor Index in the United States; during this period, net purchases amounted to 200 million dollars (approximately 305.8 billion won).

‘Roundhill T-REX 2X Long DRAM Daily Target ETF (RAM)’ ranked third with net purchases of 84.91 million dollars (about 129.8 billion won). This product is a leveraged ETF that tracks twice the performance of the ‘Roundhill Memory ETF (DRAM)’, which includes memory semiconductor companies such as Samsung Electronics, SK hynix, Micron, and SanDisk. On June 24 (local time), it also recorded the highest ever first-day trading volume for a U.S. leveraged ETF at 385 million dollars.

‘Direxion Daily MSCI South Korea Bull 3X ETF (KORU)’, which tracks the Korean stock market by a factor of three, also saw net purchases of 77.87 million dollars (about 119.1 billion won), ranking fifth among overseas stocks chosen by Korean retail investors during the same period.

Domestic investors—referred to as ‘Donghak ants’—are also pouring funds into leveraged ETFs. According to ETFCheck, all of the top five products by net individual purchases in the past week were leveraged products. The number one product, KODEX SK hynix Single Stock Leveraged ETF, attracted 686 billion won; the second, KODEX Samsung Electronics Single Stock Leveraged ETF, drew 388.6 billion won; and the third, TIGER SK hynix Single Stock Leveraged ETF, received 322.2 billion won.

During this period, global semiconductor stocks corrected due to doubts about the return on investment in the artificial intelligence (AI) industry. The returns on these ETF products dropped as much as the negative 20% range. Even the relatively resilient Samsung Electronics leveraged ETF posted a return of -7.96%. Although there were expectations that Samsung Electronics’ Q2 earnings announcement the previous day would serve as a turning point for its stock price, the shares fell even after reporting record-high results.

Industry experts have issued warnings regarding domestic investors’ aggressive purchases of leveraged ETFs. An asset management firm representative stated, “There is strong confidence among individual investors in the future growth potential of the semiconductor industry, which is leading to net inflows into leveraged ETFs even during this period of correction in an effort to maximize returns.” He added, “In highly volatile markets like the current one, holding leveraged products for the long term can result in significant losses due to the so-called ‘negative compounding effect.’ Leveraged products should not be used as a long-term investment tool for accumulating semiconductor stocks based on their long-term outlook. Rather, they should be used only for short-term trading when there is a clear directional signal.”

Lee Sanghyun, a researcher at Meritz Securities, commented, “Since last year, the stock market has continued its extreme focus on semiconductors, and with volatility remaining high due to factors like quarter-end rebalancing pressures and market supply-demand, caution is needed when investing in leveraged ETFs.”

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