"Retail Investors Flocking to Leveraged ETFs Expecting 'Further Rise'"

Net Purchase of 80 Billion KRW in KOSPI and KOSDAQ Leverage ETFs
Net Buying Driven by Expectations of Continued Index Rally... Focus on Short-Term Trading

Recently, the number of individual investors investing in leveraged exchange-traded funds (ETFs) has been increasing. This is interpreted as a reflection of expectations that prices will rise further, given that both the KOSPI and KOSDAQ experienced rallying gains at the end of last year.

According to FnGuide on the 8th, the ETFs most actively net purchased by individuals over the past month (December 4, 2023 to January 4, 2024) were Samsung Asset Management's KODEX Leverage and KODEX KOSDAQ150 Leverage. They ranked first and second with net purchases of 57.1 billion KRW and 28.3 billion KRW, respectively.

KODEX Leverage and KODEX KOSDAQ150 Leverage are leveraged ETFs that track twice the daily returns of the KOSPI 200 and KOSDAQ 150 indices, respectively. The reason individuals actively bought these products is because the KOSPI and KOSDAQ continued to rise toward the end of last year.

The KOSPI fell to 2,277.99 on October 31 last year but rose to 2,669.81 on January 2. Although the closing price on the 5th was 2,578.08, it increased by more than 300 points compared to the end of October last year. The KOSPI 200 index also rose from around 305 on October 31 to about 330 on the 5th. The KOSDAQ showed a similar trend. During the same period, the KOSDAQ rose from 736.10 to 878.33, and the KOSDAQ 150 jumped from 1,147.92 to 1,291.32.

An industry insider from the asset management sector said, "Since the domestic stock market maintained an upward trend at the end of last year, it seems that expectations for the rally to continue have emerged."

Along with this, there is also an opinion that short-term investors flocked to leveraged ETFs because they track twice the daily returns of the index. Another asset management official said, "Leveraged or inverse ETFs tend to be purchased when index volatility is high," adding, "They are mainly bought by individual investors who engage in short-term rather than long-term investments."

Additionally, Samsung Asset Management's KODEX CD Interest Rate Active (Synthetic) ranked third with a net purchase of 24.6 billion KRW by individuals. This is interpreted as an increase in investment demand seeking stable interest income, given that the benchmark interest rate remains high. In particular, this product is a 'parking account-type' product that allows investors to earn interest income even by depositing the principal for just one day.

Besides these, ETFs related to secondary batteries also ranked high. Samsung Asset Management's KODEX Secondary Battery Industry Leverage attracted net purchases of 6.7 billion KRW, and Mirae Asset Management's TIGER China Electric Vehicle SOLACTIVE saw net purchases of 5.2 billion KRW. KODEX Secondary Battery Industry Leverage tracks twice the FnGuide secondary battery industry index, which is followed by the previously listed KODEX Secondary Battery Industry ETF. TIGER China Electric Vehicle SOLACTIVE mainly invests in Chinese electric vehicle and battery companies.