The Kospi is displayed at the dealing room of Hana Bank's headquarters in Seoul on Friday, after the benchmark closed at 6,595.45 — up 1,001.89 points, or 17.91 percent, from Thursday, marking the largest single-day gain in both points and percentage terms in the index's history. [Yonhap]
The Kospi is displayed at the dealing room of Hana Bank's headquarters in Seoul on Friday, after the benchmark closed at 6,595.45 — up 1,001.89 points, or 17.91 percent, from Thursday, marking the largest single-day gain in both points and percentage terms in the index's history. [Yonhap]

Retail investors sharply changed their trading behavior on the first day of tightened deposit requirements for single-stock leveraged exchange-traded funds. Individual investors net sold more than 1 trillion won ($694 million) worth of single-stock leveraged ETFs while net buying more than 500 billion won in index inverse ETFs, which fall outside the new regulations. Even as the Kospi posted the largest single-day gain in its history, trading in other high-risk products remained brisk.

Financial regulators began enforcing supplementary measures for single-stock leveraged ETF and exchange-traded note (ETN) investment on Thursday. The basic deposit requirement rose from 10 million won to 30 million won, and substitute securities — including shares, ETFs and bonds, which had previously counted for up to 70 percent of the required deposit — were excluded from the calculation entirely. The measures aim to raise the cash burden on investors and curb excessive leveraged trading.

On the first day of the new rules, retail investors fled single-stock leveraged products en masse, with such ETFs dominating the list of the most net-sold securities.

The heaviest net selling hit KODEX SK Hynix Single Stock Leverage at 587.9 billion won, followed by KODEX Samsung Electronics Single Stock Leverage at 215.6 billion won, TIGER SK Hynix Single Stock Leverage at 153.7 billion won, TIGER Samsung Electronics Single Stock Leverage at 59.6 billion won and SOL SK Hynix Single Stock Leverage at 15.2 billion won.

Trading volume figures also reflected the retreat from single-stock leveraged products. Combined turnover for 16 single-stock leveraged and inverse ETFs on Thursday came to about 3 trillion won — roughly a quarter of the 12.4 trillion won recorded on June 30. KODEX SK Hynix Single Stock Leverage and SOL SK Hynix Futures Single Stock Inverse 2X, which ranked first and second by ETF turnover on June 30, slipped to fifth and ninth place, respectively, on Thursday.

The money that left single-stock products moved into index inverse ETFs, which are not subject to the new rules. Net purchases of major index inverse ETFs by retail investors on Thursday reached about 500 billion won. KODEX 200 Futures Inverse 2X led all securities with net retail buying of 371.5 billion won, while KODEX Inverse ranked second at 111.1 billion won. KODEX Kosdaq 150 Futures Inverse (11.4 billion won), TIGER 200 Futures Inverse 2X (7 billion won) and TIGER Inverse (4 billion won) followed.

Trading volume for major index inverse ETFs rose across the board — KODEX 200 Futures Inverse 2X gained 21.7 percent, KODEX Inverse 15.7 percent, KODEX Kosdaq 150 Futures Inverse 10.2 percent, TIGER 200 Futures Inverse 2X 28.3 percent and TIGER Inverse 58.4 percent. By contrast, KODEX SK Hynix Single Stock Leverage fell 76.1 percent and SOL SK Hynix Futures Single Stock Inverse 2X dropped 65.3 percent.

The brokerage community expects the measures to ease the concentration of leveraged demand in single-stock products. Han Ji-young, a researcher at Kiwoom Securities, said that with assets under management in single-stock leveraged ETFs already shrinking due to recent sharp declines in Samsung Electronics and SK Hynix share prices, the additional deposit requirement could gradually reduce supply-and-demand volatility driven by leverage.

Some analysts also see potential for broader rotation within the Kospi. Kim Jae-seung, a researcher at Hyundai Motor Securities, said the growing share of single-stock leveraged ETFs in retail domestic equity ETF trading had intensified concentration within the Kospi, adding that the new measures could encourage wider rotation across the index.

However, some analysts caution against drawing conclusions after just one day. Park Woo-yeol, a researcher at Shinhan Investment, said trading may have declined partly because the underlying assets — Samsung Electronics and SK Hynix shares — surged sharply from the opening bell. "The policy effect needs to be monitored a little longer," he said.


kacew@heraldcorp.com