First Financial reported that South Korean retail investors are rotating into US leveraged ETFs after the government tightened oversight of single-stock leveraged exchange-traded funds. Data from the Korea Exchange's information data system on Aug. 5 showed that turnover in the 16 single-stock leveraged and inverse ETFs listed in South Korea dropped from 13.0361 trillion won on July 15 to 1.3329 trillion won on Aug. 4, an 89.8% collapse, after regulators raised basic margin requirements and set investment quota limits. Individual demand for leveraged products has not disappeared. In the July 15-Aug. 4 window, SOXL, the Direxion Daily Semiconductor Bull 3X fund, ranked first in net purchases of overseas stocks by South Korean investors, with net buying of $2.48789 billion. TSLL, the 2x leveraged Tesla ETF, came in sixth with net purchases of $214.36 million. KORU, a 3x South Korea equities leveraged ETF, was 11th with inflows of $130.95 million. Those foreign flows coincided with a sharp drop in domestic turnover.
South Korea's retail investors are moving money into US leveraged ETFs after the government tightened rules on single-stock leveraged funds, First Financial reported.
The Korea Exchange's information data system showed on Aug. 5 that turnover in the 16 single-stock leveraged and inverse ETFs listed there fell to 1.3329 trillion won by Aug. 4. That is down 89.8% from 13.0361 trillion won on July 15, before the regulatory changes took effect. Financial regulators had raised basic margin requirements for those products and introduced limits on investment amounts.
Individual demand for leveraged exposure has not cooled. Korean investors simply changed where they buy it, shifting toward overseas products such as US funds.
Between July 15 and Aug. 4, SOXL, the Direxion Daily Semiconductor Bull 3X fund, ranked first in net purchases of overseas stocks by South Korean investors, with net buying of $2.48789 billion. TSLL, the 2x leveraged Tesla ETF, ranked sixth with net purchases of $214.36 million. KORU, the 3x South Korea equities leveraged ETF, ranked 11th with inflows of $130.95 million.
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