"Reached the Peak" Now Betting on a Decline

KOSPI Surpasses 2400, Individual Investors Buy Inverse ETFs

[Asia Economy Reporter Oh Ju-yeon] Unlike the U.S. stock market, which has been undergoing a correction since September, the domestic stock market is showing strength, with the KOSPI surpassing the 2400 mark and the KOSDAQ index breaking through 900. However, individual investors are paying attention as they anticipate a decline or correction once the KOSPI reaches the previous high range, leading them to buy inverse exchange-traded funds (ETFs) again.

According to the Korea Exchange on the 16th, from the 1st to the 15th of this month, individual investors net purchased 298.35 billion KRW worth of the KODEX 200 Futures Inverse 2X ETF, ranking fourth in net purchases after LG Chem (590.269 billion KRW), Naver (NAVER, 355.552 billion KRW), and Kakao (346.394 billion KRW).

In particular, as the KOSPI repeatedly exceeded the 2400 mark this week and rose to the previous intraday high of 2458.17 recorded on August 13, individual investors placed more weight on a potential index decline, purchasing 130 billion KRW worth of KODEX 200 Futures Inverse 2X over two days on the 14th and 15th.

The KODEX 200 Futures Inverse 2X ETF rose to around 12,800 KRW on March 19 but has since dropped to about 3,900 KRW, roughly a quarter of its peak. Since then, the total net purchases of this ETF by individual investors have reached 3.3801 trillion KRW. Notably, the largest portion of these purchases occurred in March and April, following the outbreak of COVID-19. From March 19 to 31, net purchases amounted to 966.778 billion KRW, and in April, 1.124823 trillion KRW was bought. In May, June, and July, individual investors continued to increase their holdings by purchasing 166.947 billion KRW, 477.436 billion KRW, and 368.542 billion KRW worth respectively. During this period, the index rebounded sharply, jumping from the 1400 level to 2400. As a result, over 3 trillion KRW is effectively tied up due to the index's rise. Last month, individual investors net sold 22.742 billion KRW worth of KODEX 200 Futures Inverse 2X for the first time in six months, but this amount is negligible compared to the volume accumulated since March 19. During the same period, foreign and institutional investors net sold 565.2 billion KRW and 3.4013 trillion KRW worth of the ETF, respectively.

In the securities industry, it is expected that while the domestic stock market may experience short-term volatility, the upward trend based on corporate earnings will resume. Lee Kyung-min, a researcher at Daishin Securities, said, "As we enter the third-quarter earnings season and there have been economic indicator surprises in Q3, the upward trend based on fundamentals can continue. There may be short-term price corrections, but these are one step back for two steps forward."

Lee Eun-taek, a researcher at KB Securities, also said, "Although recently plummeting tech stocks still face issues that could cause several fluctuations, a bottom formation process is expected from mid-September to mid-October," adding, "It is advisable to make staggered purchases during sharp declines."