"I Feel Sick From 3% Daily Swings"... Retail Investors Cut Losses in Korea and Flee to U.S. Markets

Last week, individuals made the largest net purchases in TIGER US S&P500
Multiple US index ETFs were also aggressively acquired
"Double inverse" products dominate KOSPI bets, while "leverage" leads KOSDAQ trades
Significant sell-offs record

As record-level volatility continues to grip the Korean stock market, individual investors are flocking en masse to U.S. index-tracking products instead of domestic equities. Sentiment diverges between the two markets: most investors are bearish on the KOSPI, while some expect a rebound in the KOSDAQ. At the same time, there has been a noticeable exodus from single-stock leveraged exchange-traded funds (ETFs) that had previously shown signs of overheating.

According to ETF Check on the 27th, the most purchased ETF by individual investors over the past week was TIGER S&P500, which attracted 120.3 billion won in net purchases. This was followed by KODEX US Nasdaq 100 (85.1 billion won), KODEX US S&P500 (65.1 billion won), and TIGER US Nasdaq 100 (59.1 billion won)—all U.S. index-linked products that topped the net buying rankings. These four ETFs alone saw a total inflow of 329.6 billion won in individual investments.

It appears that individual investors, fatigued by the roller-coaster performance of the local market, are shifting toward U.S. index ETFs, which are perceived as more reliable long-term and less volatile. Over the past week, the S&P500 index fell by 0.66% and the Nasdaq 100 index declined by 0.48%, while the KOSPI fell by 1.91%. Although the weekly drop hovered around 1%, the KOSPI experienced swings greater than 3% on all but one trading day last week, continuing its highly volatile trend.

Investor outlook for the Korean market diverged sharply between the KOSPI and KOSDAQ. There was a strong tendency to bet on further declines in the KOSPI. Investors bought 74.5 billion won of KODEX 200 Futures Inverse 2X (known as "geopverse"), which yields double returns when the index drops, and purchased 68.8 billion won net of KODEX Inverse. In contrast, representative KOSPI index-tracking products such as KODEX Leverage (-129 billion won), KODEX 200 (-106.6 billion won), and TIGER 200 (-17.1 billion won) saw net selling, with outflows exceeding 250 billion won throughout the week.

Conversely, investor sentiment was optimistic regarding the KOSDAQ, with expectations of a technical rebound. Individuals made net purchases of 76.6 billion won of KODEX KOSDAQ150 Leverage, indicating hopes for a bounce-back in the KOSDAQ.

Meanwhile, there was a large-scale selloff in the single-stock leveraged ETF market, previously a hotbed for concentrated funds, leading to significant outflows. Last week, the most heavily sold ETF by individuals was KODEX SK hynix Single Stock Leverage, with net sales reaching 159.2 billion won. This was followed by TIGER SK hynix Single Stock Leverage (-78.8 billion won), KODEX Samsung Electronics Single Stock Leverage (-44.9 billion won), and TIGER Samsung Electronics Single Stock Leverage (-44.8 billion won). Across these four single-stock leveraged products, net sales totaled 327.7 billion won. In stark contrast, 'SOL SK hynix Futures Single Stock Inverse 2X', which earns double profits when SK hynix shares fall, ranked second in overall net buying with 98.9 billion won purchased.

This exodus from single-stock leveraged ETFs by individual investors is seen as a result of not only the increased risk from greater share price volatility, but also more stringent regulations directly imposed recently by the financial authorities—to protect investors and cool down an overheated market. New rules, such as tightening the minimum deposit requirement, have created higher barriers to entry, accelerating outflows as short-term profit-taking and stop-loss selling converged. The Financial Services Commission announced on July 16 that it would increase the minimum deposit from 10 million won to 30 million won, exclude alternative securities from deposit calculations, and raise the minimum trading lot (from 1 to 20 units). Furthermore, on July 24 they moved up the implementation date for these deposit requirement enhancements to July 31 from the previously scheduled next month.

Lee Sanghyun, a researcher at Meritz Securities, stated, "Strengthening the minimum deposit requirement and increasing trading lot sizes will help cool overheated transaction volumes and stabilize the market," adding, "While these measures may serve as obstacles for investors, they are the minimum necessary to protect market participants."

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