South Korea Chip Leveraged ETF Trading Volume Plunges to Record Low 4%, Forcing Retail Investors to Exit

BlockBeats News, August 30th, according to Bloomberg, the trading volume of Samsung Electronics and SK Hynix's double leveraged ETF has dropped to 4% of the June peak, and the related products may see a monthly net outflow of funds for the first time since their launch in August. South Korea has been tightening trading rules since July, with the mandatory simulated trading requirement that took effect on August 19th being considered a significant factor in the decline of retail participation.

Under the new rules, investors must complete a 5-day simulated trading course, download a Windows-only program on their computers, and trade with virtual funds for at least 1 hour each day. The system provides investors with 100 million Korean won in virtual funds to demonstrate the risks of leveraged products and "volatility drag." Investors also need to meet a minimum cash deposit requirement of 30 million Korean won. The Korea Exchange stated that there are currently no plans to introduce a mobile simulated trading platform.

The Samsung Electronics and SK Hynix-related single stock leveraged ETFs were launched in May this year, originally aimed at attracting retail funds back to the South Korean domestic market. During the peak trading period, the trading volume of these leveraged ETFs and the stocks of the two chip companies together accounted for over 80% of the total trading volume of the Korean stock market, leading to significant market price fluctuations.

Data shows that the combined net outflow of the related ETFs in August was approximately $1 billion, with the assets under management dropping from a peak of $11.4 billion in late June to $5 billion on August 27th. Apart from regulatory constraints, market concerns about the high capital expenditure and commercialization prospects of the AI industry have triggered multiple rounds of global tech stock sell-offs, also leading to a decrease in its asset size.

Rebecca Sin, an industry research analyst at Bloomberg, stated that as regulatory agencies continue to tighten rules, the outflow of related funds may persist in the short term. The cooling of trading activity has also eased market volatility, with the South Korea Composite Stock Price Index volatility index dropping from 97 in late June to around 50, hitting a 4-month low. The South Korean benchmark index has risen by 61% year-to-date, but is still 25% lower than its previous all-time high set two months ago.