South Korean retail investors are increasing their positions in high-leverage derivatives, with the total open interest reaching 3.3 trillion Korean won. The leveraged risk in chip stocks has raised concerns.

BlockBeats News, July 22, South Korean retail investors are actively buying high-leverage Contract for Difference (CFD) again. Data from the Korea Financial Investment Association shows that as of July 21, the CFD position size in South Korea has increased to approximately 33 trillion Korean won (about $22 billion), nearly two-thirds higher than a year ago.

The data shows that SK Hynix and Samsung Electronics have become the most concentrated leverage betting targets for South Korean retail investors. Over the past year, SK Hynix's CFD position has surged by nearly 2500% to 2350 billion Korean won, while Samsung Electronics' CFD position has expanded to around 2170 billion Korean won, five times higher than before.

CFDs allow investors to only pay about 40% of the margin to obtain full exposure to the underlying asset, but investors do not actually hold the stocks. Analysts point out that when a market downturn triggers additional margin calls, the stocks held by banks to hedge the risk may be sold off simultaneously, thereby amplifying market volatility.

There are concerns in the market that the risk of CFDs, combined with margin trading, leveraged ETFs, and other products, may lead to a cascading liquidation effect during a market correction. The Korea Capital Market Institute stated that if a large number of leveraged positions are concentrated in the same direction and investors are unable to meet margin requirements, forced liquidation will further exacerbate market volatility.

In 2023, South Korea experienced a retail investor CFD position blow-up, which led to multiple stocks hitting continuous limit down and triggered regulatory crackdown. Analysts believe that as South Korean retail investors ramp up high-leverage trading again, similar risks are once again drawing market attention.