Betting on a Stock Market Downturn? Institutions Net Buy 'Gopbus' for 2 Weeks

[Asia Economy Reporter Ji Yeon-jin] Institutional investors have been buying a large number of so-called 'Gopbus' products that bet on a declining market amid increased volatility in the domestic stock market.

According to the Korea Exchange on the 7th, institutional investors net purchased 120.2 billion KRW worth of the inverse exchange-traded fund (ETF) 'KODEX 200 Futures Inverse 2X' in the KOSPI market over two weeks from February 22 to March 5.

This product, well known by the nickname 'Gopbus,' is an inverse leveraged ETF that tracks the KOSPI 200 futures index inversely by 2 times, generating profits when stock prices fall.

During this period, 'Gopbus' ranked third in net purchase amount by institutions on the KOSPI, following POSCO (182.1 billion KRW) and Lotte Chemical (145 billion KRW).

The amount institutions spent buying 'Gopbus' exceeded the net purchase amounts of several large-cap stocks such as SK Hynix (115 billion KRW), Shinsegae (86.6 billion KRW), KT (74.3 billion KRW), and S-Oil (69.5 billion KRW).

Foreign investors also net purchased 33.4 billion KRW worth of 'KODEX 200 Futures Inverse 2X' during the same period. On the other hand, individual investors net sold 152.5 billion KRW worth of 'Gopbus' over two weeks. Essentially, institutions and foreigners absorbed this volume.

Inverse ETFs are structured to generate profits when the index falls by buying put options or selling stock index futures. In particular, when '2X' is attached to the name, like 'KODEX 200 Futures Inverse 2X,' it typically yields about 2% profit when the index drops 1%. Therefore, a surge of money into inverse ETFs, especially 'Gopbus,' indicates many investors are betting on a stock price decline.

However, when institutions buy such leveraged ETFs, a significant portion of the purchase volume may come from liquidity providers (LPs), which means the nature of the transactions could differ. Securities firms and others act as LPs to resolve liquidity shortages by buying or selling when there are no bids or offers. To provide liquidity, LPs often buy volumes sold off by individuals regardless of market direction or investment positions. In fact, during the two weeks, 97.66% of the institutional net purchase amount, equivalent to 117.4 billion KRW, was made by financial investment entities.