Bloomberg "One Shot at Life... Han Ants Spotlight on US Leverage ETF"

This Year, Major US Leveraged ETF Investments Triple

"Koreans find simple financial products (straight vanilla) boring. They want leverage."

Bloomberg reported on the 3rd (local time) that Korean individual investors, known as Seohak Gaemi, are flocking to U.S. leveraged exchange-traded funds (ETFs) that can generate 2 to 3 times the returns depending on index volatility. Leveraged funds are products that can yield large profits when stock prices rise but also cause losses to snowball in the opposite case. The media diagnosed that the uniquely Korean risk preference phenomenon is leading to a boom in leveraged ETF investments.

According to Bloomberg's analysis of data from the Korea Securities Depository on the same day, individual investors in Korea invested a total of $2.3 billion in the largest leveraged and inverse ETFs listed on the U.S. stock market this year. The investment scale increased about threefold compared to the same period last year.

Seohak Gaemi mainly concentrated their investments on leveraged funds holding tech stocks. For TSLL US, an ETF that tracks 1.5 times the price increase of Tesla, a leading U.S. electric vehicle stock, Korean individual investors held 35% of the total assets. Korean investors also held about 28% of BULZ US assets, an ETF that tracks 3 times the rise of FAANG (Facebook, Amazon, Apple, Netflix, Google) and other tech stocks, and about 19% of SOXL US assets, an ETF that tracks 3 times the rise of semiconductor stocks.

Asset Holding Ratio of Major U.S. Leveraged ETFs by Korean Investors

Park Eun-hye, 35, who works at a semiconductor company located in Hwaseong, Gyeonggi Province, told the media, "Many people here are buying SOXL, and some are buying the product without even knowing it is a leveraged ETF," adding, "It is hard to find someone here who does not buy ETFs." SOXL has surged nearly 140% just this year.

The preference of Korean individual investors for leveraged ETFs is analyzed to be a complex result of the uniquely Korean risk preference phenomenon, the variety of ETF products, and the influence of social networking services (SNS). Rebecca Shin, an equity strategist at Bloomberg Intelligence (BI), a research institution under Bloomberg, said, "Koreans find simple financial products boring," adding, "They want at least 2 to 3 times the returns in certain sectors. Korean investors allocate more than 30% of their overseas ETF investments to leveraged products." She further added, "With a variety of ETF products available and the influence of SNS explaining the advantages of these products, the popularity of ETFs is soaring in Korea."

Additionally, unstable pension systems and soaring living costs are cited as factors driving investors to seek a 'big win' by flocking to leveraged ETFs.

Im Dong-seop, a father of two, explained his reason for investing in U.S. leveraged ETFs: "General ETFs are excellent products, but leveraged ETFs seem more suitable for aiming for high returns with a small initial capital," adding, "I am still young and my children are young. Now is the golden time for investment, so I plan to continue aggressive investing going forward." James Jung, 43, said, "The safest way for an ordinary office worker like me to become wealthy is to invest long-term in the S&P 500 index, but it takes a lot of time," adding, "For this reason, I am trying to shorten the time to achieve wealth through financial assets by investing in leveraged ETFs."