Confused 'Donghak Gaemi', What Now?

Gopbeoseu rises when held
but falls when moved to leverage

[Asia Economy Reporter Oh Ju-yeon] The KOSPI has been rising relentlessly but is now fluctuating around the 2600 level, leaving individual investors confused between inverse and leveraged ETFs. The KODEX 200 Futures Inverse 2X ETF, known as 'Gopbeoseu,' has been repeatedly bought and sold within a day, resulting in continuous losses.

According to the Korea Exchange on the 26th, individual investors purchased 103.6 billion KRW worth of KODEX 200 Futures Inverse 2X over the past week from the 17th to the 25th. On the 17th, when the index closed down 0.15% at 2539.15, individuals bet on further declines and bought 6.1 billion KRW worth of the inverse ETF. However, the index rose to 2545.64 the next day. Individuals sold 2.5 billion KRW worth but then bought 16.5 billion KRW worth on the 19th as the index rose to 2547.42. The index then surpassed 2550 to reach 2553.50 the following day, causing a loss of 1.17 billion KRW when selling the inverse ETF bought at 3445 KRW for 3435 KRW.

On the 23rd, when the index exceeded 2600, the volume of inverse ETF purchases increased to 92.5 billion KRW. The expectations were clearly off. On the 24th, the index closed at a record high of 2617.76, up 0.58%, while individuals sold 27.7 billion KRW worth of the inverse ETF at 3240 KRW. This price was 1.07% lower than the previous day and 5.95% lower than on the 17th.

On the 25th, as the 2600 level was breached intraday and the inverse ETF price rose, individual investors interpreted this as a signal of decline and bought 30.4 billion KRW worth of the inverse ETF. However, as of 10:10 AM that day, the index was trading at 2607.60, up 0.23% from the previous day. Although it dropped to 2592.43 intraday, it rebounded again. The inverse ETF price was 3265 KRW, down 0.46% from the previous day.

Meanwhile, from the 17th to the 25th, individuals withdrew 50 billion KRW from the KODEX Leverage ETF. Especially during the five trading days when the index rose from 2539.25 to 2602.59, individuals consistently sold leverage ETFs. However, when the index surpassed 2617 on the 24th, they bought leverage ETFs in the largest volume this month. The next day, the leverage ETF price fell 1.16% from 18,610 KRW to 18,395 KRW, making it difficult to avoid losses.

Individuals explain that despite the rising index, they buy inverse ETFs because it is the only hedging (risk avoidance) tool available. One investor said, "The index is rising sharply, and a correction could come at any time, but there is no other way to hedge. If losses occur, we try to respond partially with the inverse ETF."

If the market continues to consolidate for a while, individual investors' concerns are expected to deepen. Seo Jeong-hoon, a researcher at Samsung Securities, said, "Recent short-term rises have shown some technical overheating signals. However, considering the ongoing dollar weakness and foreign investor supply conditions, the index's decline during any correction will likely be significantly limited."