"Absurd Move," Warns Wall Street... Korean Retail Investors Flock to Leveraged Bets in US Market After Leaving KOSPI

CNBC Analyzes Data from Korea Securities Depository

So-called "Seohak ants," Korean individual investors, are attracting attention on Wall Street as they make large investments in SK hynix American Depositary Receipts (ADRs) listed on the New York Stock Exchange and high-risk leveraged products following the recent correction in the KOSPI.

On August 17 (local time), CNBC, a leading business news channel in the United States, reported that Korean individual investors are heading to the New York Stock Exchange after the KOSPI correction. The outlet especially noted that these investors are maintaining their preference for high-risk equities as they place their bets.

According to data from the Korea Securities Depository analyzed by CNBC, since July, Korean investors have made net purchases of US stocks worth 4.5 billion dollars (approximately 6.3 trillion won). Most of these purchases were focused on stocks related to artificial intelligence (AI) and semiconductors. Notably, SK hynix ADR accounted for 19% of the total net purchases, making it the second most purchased US security by net amount.

On the 10th of last month (local time), SK hynix commenced trading on the NASDAQ of the New York Stock Exchange. Photo by Reuters Yonhap News

Among the top 10 securities most purchased by domestic investors in the US last month, 4 were leveraged products. The top net purchase was "Direxion Daily Semiconductor Bull 3X Shares (SOXL)," a leveraged fund that tracks the semiconductor index at three times the daily movement. If semiconductors rise 1% in a day, SOXL yields an approximate 3% gain, but if they fall by 1%, the loss is tripled as well.

In addition, "ProShares UltraPro QQQ (TQQQ)," which tracks the Nasdaq 100 at three times leverage, ranked fourth in net purchases, while "ProShares Ultra QQQ (QLD)," which tracks the Nasdaq 100 at double leverage on a daily basis, placed sixth. This indicates that the aggressive preference for single-stock leveraged products originally seen on the Korean stock market is being carried over to the US market.

In response, Wall Street investment experts are issuing warnings. Owen Lamont, Senior Vice President at Acadian Asset Management, pointed out that the price gap between SK hynix ADR and the parent stock listed in Korea has widened to double-digit percentages, and the volatility of the ADR now exceeds that of the original Korean shares. He commented, “It makes no sense for Korean investors to purchase Korean company ADRs in the US,” adding, “The price disparity between the parent shares and ADRs can be interpreted as a sign of market overheating.”

Philip Wu, an analyst at Reliant Global Advisors, remarked, “If you look at Korean investors’ buying patterns, they are repurchasing US stocks that are linked to the AI hardware theme, which recently came under selling pressure in the Korean market,” calling it “a paradoxical situation.”

Vice President Lamont referenced a case at the end of 2024 when an influx of Korean investors into US quantum computing stocks increased volatility and warned, “When individual investors favor particular stocks, there is a greater likelihood that price distortions will emerge in parts of the market.”

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