Trading in South Korea’s single-stock leveraged exchange-traded funds has dropped sharply after regulators raised the minimum cash margin for investors. Data from the Korea Exchange showed that 16 leveraged and inverse ETFs tied to Samsung Electronics and SK Hynix on the KOSPI market recorded combined turnover of 1.2388 trillion won over the two trading days after the new rule took effect. That was down 58.6% from 2.9907 trillion won on July 31, the day the measure was implemented. Before the change, authorities raised the minimum cash margin for single-stock leveraged ETF investors from 10 million won to 30 million won. Compared with 12.4485 trillion won in turnover on July 30, the last trading day before the measure, current trading volume has fallen to roughly one-tenth of that level. Retail participation also cooled. Retail investors’ turnover in leveraged and inverse products fell to 250.7 billion won, less than a quarter of the 929.9 billion won recorded on July 31. Analysts said the higher margin threshold has started to curb speculative inflows and is changing the pattern of retail investors repeatedly buying leveraged products during declines in the underlying stocks.
Trading activity in South Korea’s single-stock leveraged ETFs has dropped sharply after regulators raised the minimum cash margin required from investors, with turnover now down to about one-tenth of its earlier peak.
According to data from the Korea Exchange, 16 single-stock leveraged and inverse ETFs linked to Samsung Electronics and SK Hynix on the KOSPI market posted combined turnover of 1.2388 trillion won in the two trading days after the new measure took effect. That marked a 58.6% decline from 2.9907 trillion won on July 31, the day the rule was implemented.
South Korean regulators had raised the minimum cash margin requirement for investors in single-stock leveraged ETFs from 10 million won to 30 million won. Compared with turnover of 12.4485 trillion won on July 30, the last trading day before the measure took effect, trading in the related products has now fallen to roughly one-tenth of that level.
The pullback was especially visible among retail investors. Data showed retail turnover in leveraged and inverse products fell to 250.7 billion won, less than one-quarter of the 929.9 billion won recorded on July 31.
Analysts said the higher margin threshold has started to show an early effect in limiting speculative capital inflows, while also changing the pattern of retail investors continuing to buy leveraged products during declines in the underlying stocks.
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