[Asia Economy Reporter Myunghwan Lee] The investment keywords for Seohak Gaemi in July were 'inverse,' 'fear,' and 'risk aversion.' As the U.S. stock market experienced significant fluctuations, leveraged exchange-traded funds (ETFs) with high ratios that can generate short-term profits ranked high. ETFs tracking the fear index, which moves opposite to the index, or high-dividend ETFs with risk-averse characteristics also attracted investment. Considering the possibility of increased volatility in the U.S. stock market, such risk-averse investment trends are expected to continue.
On the 30th, Asia Economy analyzed the top net purchase U.S. stocks by domestic investors from July 1 to 27 on the Korea Securities Depository's securities information portal SEIBro. ETF products occupied many of the top ranks. Except for Alphabet, which ranked 4th among the top 10 net purchases, the other nine were ETF products. Among them, six ETFs were leveraged products with high volatility.
The top net purchase was the 'ProShares UltraPro Short QQQ ETF (SQQQ),' a leveraged inverse ETF that tracks the Nasdaq 100 index at three times inverse leverage. During this period, domestic investors net purchased $70.3 million (approximately 91.2 billion KRW) worth of SQQQ. Considering the inverse nature of betting on declines and the high volatility of leveraged products that can yield short-term profits, investors appear to have made short-term bets on index declines. The 'ProShares Short QQQ ETF (PSQ),' which tracks the same index at one times inverse leverage, also ranked 10th in net purchases.
The 'Direxion Daily Semiconductor Bear 3X (SOXS),' which tracks the Philadelphia Semiconductor Index at three times inverse leverage, and the 'Direxion Daily Semiconductor Bull 3X (SOXL),' which tracks the same index at three times leverage, consecutively ranked 2nd and 3rd. Both products offer triple leverage, and as tech stocks showed significant volatility, investors seeking short-term gains flocked to these ETFs. In July, tech stocks including semiconductors exhibited high price volatility due to the impact of Q2 earnings announcements in the U.S. stock market.
Two ETFs tracking the Chicago Board Options Exchange (CBOE) Volatility Index (VIX), known on Wall Street as the 'fear index,' also newly entered the top ranks. These stocks did not appear among the top net purchases of overseas stocks last month. Specifically, the 'ProShares Ultra VIX Short-Term Futures (UVXY),' which tracks the VIX index at 1.5 times leverage, ranked 5th, and the '2x Long VIX Futures (UVIX),' which tracks the same index at double leverage, ranked 9th.
ETFs with high dividends used for risk aversion also occupied top ranks. The monthly dividend active covered call ETF managed by JP Morgan, 'JP Morgan Equity Premium Income (JEPI)' (6th), and the dividend-focused 'Schwab US Dividend Equity (SCHD)' (8th) also ranked high.
The price volatility of the top net purchase stocks was mixed. Inverse and VIX index-tracking ETFs, which move opposite to the index, fell significantly, while leveraged products tracking the index rose. This was because the U.S. stock market rebounded and closed higher on the 27th, influenced by the Federal Reserve's giant step (a 0.75 percentage point increase in the benchmark interest rate at once) decision and remarks by Fed Chair Jerome Powell.
The securities industry expects the possibility of increased volatility in the U.S. financial market to remain. Yumi Kim, a researcher at Kiwoom Securities, said, "The U.S. stock market showed a short-term rebound in terms of resolving uncertainty," but added, "Considering some slowdown in production and consumption and the continued inflationary pressure factors, the possibility of increased volatility in the financial market due to macroeconomic indicators still exists."
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