"After the Rush to Samsung and Hynix, Goldman Sachs Points to Causes of Sharp KOSPI Decline"

"Electronics and Hynix Leveraged ETFs Accelerate KOSPI Plunge"
KOSPI Support Set at 6,800 Points

On July 14, global investment bank Goldman Sachs analyzed that mechanical selling by single-stock leveraged exchange-traded funds (ETFs) amplified the decline in the KOSPI.

In a report titled “KOSPI: Testing Key Technical Support Levels,” Goldman Sachs explained, “The recent rapid deleveraging (forced selling) of newly launched single-stock leveraged ETFs has intensified intraday volatility.”

The report noted that certain 2x leveraged ETFs based on Samsung Electronics and SK hynix, which fell by more than 30% in a single day, triggered additional sales of the underlying assets by the asset management companies as they worked to maintain the targeted leverage ratio. This process created a vicious cycle in which falling share prices led to further selling.

Goldman Sachs estimated that 62% of net institutional selling in Korea stemmed from ETF-related forced liquidations. Most net selling by foreign investors originated from passive funds, including program trading, with the scale of program selling reaching 1.18 billion dollars.

Nonetheless, the report pointed out that despite the sharp decline in the index, there were relatively few block trades (large-scale institutional selling), and selective selling was primarily seen among certain trend-following hedge funds.

Goldman Sachs identified the 6,800-point level as the most critical technical support for KOSPI. If the KOSPI fails to hold this level, the next support is around the 6,500-point level, about 4.5% below the previous day’s closing, and, if breached, it could fall further to the 6,100~6,000 range.

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