South Korean retail investors began reshaping their portfolios after financial regulators raised the base margin requirement for domestic and overseas single-stock leveraged products to 30 million won in cash from 10 million won that previously could include securities, according to Daum. The new rule took effect on July 31.
Data from the Korea Securities Depository showed that Tesla’s 2x leveraged product TSLL still logged net buying of $14.58 million on Aug. 3. A day later, buying dropped sharply to $1.56 million from $15.60 million the previous day, while selling rose to $8.68 million, leaving the product with a net sell of $7.11 million for Aug. 4. During the same period, net buying in Tesla spot shares reached $42.3 million, more than five times TSLL’s net buying figure.
Micron Technology and SanDisk showed the same split. Micron’s 2x leveraged product swung from net buying of $10.81 million on Aug. 3 to net selling of $15.98 million on Aug. 4. SanDisk’s 2x leveraged product moved from net buying of $17.74 million to net selling of $33.74 million. At the same time, spot shares of the two companies recorded net inflows of $148 million and $145 million, pointing to a clear shift in funds from leveraged tools to the underlying stocks.
Cash-only margin requirement now applies
The tighter rule requires base margin to be posted in cash. Substitute securities including stocks, exchange-traded funds and bonds are no longer counted. Existing investors making additional purchases must also meet the new standard.
Selling is still allowed, but proceeds from sales can only be counted toward cash margin after T+2 settlement.
Launch date was moved forward
The measure had originally been scheduled for phased implementation in August. South Korean regulators brought the date forward to July 31 and applied it to both domestic and overseas products at the same time, citing concerns that limiting the rule to Korean products could push money into overseas leveraged products tied to names such as Tesla and Nvidia and create a balloon effect.
Investors push back
South Korean investors reacted strongly, arguing that a measure introduced to address volatility in the local market was expanded too far when it was applied to overseas products. They also said that requiring only Korean investors to meet a 30 million won cash threshold leaves them at a disadvantage in global competition.