"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-breaking volatility continues to dominate the domestic stock market, individual investors are increasingly shifting away from Korean equities and flocking to U.S. index-tracking products. While sentiment towards the KOSPI leans toward further decline, expectations for a rebound are growing in the KOSDAQ market, illustrating diverging views on the two bourses. At the same time, there has been a notable exodus from single-stock leveraged exchange-traded funds (ETFs), which had previously experienced overheated demand.

According to ETF Check on July 27, the most heavily bought ETF by individual investors over the past week was the TIGER US S&P500, which attracted 120.3 billion won in net purchases. Next were the 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), with these major U.S. index products dominating the weekly net buying leaderboard. These four ETFs alone saw a combined inflow of 329.6 billion won in personal investment.

Analysts interpret this as individual investors, fatigued by the domestic market's rollercoaster swings, pivoting to U.S. index-based products, which are considered more reliable with less volatility. Last week, the S&P500 index fell by 0.66%, while the Nasdaq 100 dropped by 0.48%. During the same period, the KOSPI declined by 1.91%. Although the weekly losses remained in the 1% range, the KOSPI recorded daily price swings exceeding 3% almost every day except one, indicating continued extreme volatility.

Individual investors' outlook on the domestic market was split between the KOSPI and KOSDAQ. For the KOSPI, there was a clear tilt toward betting on further declines. Investors bought 74.5 billion won worth of KODEX 200 Futures Inverse 2X (Double Inverse), which offers double returns when the index drops, and net bought 68.8 billion won of KODEX Inverse. On the other hand, they net sold KODEX Leverage (-129 billion won), KODEX 200 (-106.6 billion won), and TIGER 200 (-17.1 billion won), all of which track the KOSPI, resulting in an outflow of more than 250 billion won for the week.

In contrast, investors expressed optimism for a rebound in the KOSDAQ. Individuals net bought 76.6 billion won of KODEX KOSDAQ 150 Leverage, showing confidence in a technical bounce for the market.

The single-stock leveraged ETF market, which had previously absorbed substantial inflows, saw heavy selling and large-scale capital outflows last week. The most sold ETF by individuals was KODEX SK hynix Single Stock Leverage, with 159.2 billion won in net sales. 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) also saw significant outflows, totaling 327.7 billion won in net sales across these four single-stock leverage products. In stark contrast, 'SOL SK hynix Futures Single Stock Inverse 2X,' which delivers double returns when SK hynix stock declines, recorded 98.9 billion won in net purchases and ranked as the second highest net buy overall.

This withdrawal from single-stock leveraged ETFs by individuals is attributed not only to heightened risks associated with increased share price volatility, but also to stricter regulations recently imposed by financial authorities to protect investors and to calm market overheating, such as more stringent minimum deposit requirements. The raised entry barriers, alongside a wave of short-term profit-taking and stop-loss selling, have accelerated capital outflows. The Financial Services Commission had earlier, on July 16, announced measures to raise the minimum deposit for leveraged ETF trading from 10 million won to 30 million won, exclude substitute securities from deposit calculations, and increase the minimum trading unit from one share to twenty shares. On July 24, the Commission further accelerated the implementation of the new minimum deposit rule, moving the effective date forward from the original plan of next month to July 31.

Lee Sanghyun, a researcher at Meritz Securities, said, "Strengthening the minimum deposit requirement and increasing the minimum trading unit will help ease overheated turnover and bring market stabilization. While these measures may be perceived as hurdles to investing, I believe they are necessary minimum steps to protect market participants."

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