Domestic and international individual investors are increasingly gravitating toward leverage products. In South Korea, leveraged exchange-traded funds (ETFs) have dominated trading volumes, while in the U.S. market, ETFs that track the Philadelphia Semiconductor Index threefold have emerged as the top choice for South Korean retail investors. Despite recent market volatility, individual investors are actively betting on high-risk products that maximize returns rather than reduce risk.
According to the Korea Exchange, from June 8 to 12, eight of the top ten ETFs by trading volume in South Korea were either leveraged or inverse products. The KODEX Leverage ETF topped the list with a trading volume of 14.59 trillion won. Following it, the KODEX SK Hynix Single Stock Leverage ETF ranked third with 12.33 trillion won, while the KODEX Samsung Electronics Single Stock Leverage ETF (8.63 trillion won), TIGER SK Hynix Single Stock Leverage ETF (7.31 trillion won), and TIGER Samsung Electronics Single Stock Leverage ETF (5.37 trillion won) also saw significant trading volumes.
Notably, funds have concentrated on single-stock leverage ETFs based on Samsung Electronics and SK Hynix. The trading volume of four single-stock leverage ETFs from the KODEX and TIGER brands reached 33.65 trillion won over the week, comparable to the trading volumes of the top KOSPI market capitalization stocks during the same period.
In fact, when examining the total trading volumes of all listed stocks, SK Hynix led with 61.30 trillion won, followed by Samsung Electronics at 49.48 trillion won. Samsung Electro-Mechanics (13.16 trillion won) and Naver (7.23 trillion won) followed. The KODEX Leverage ETF recorded trading volumes comparable to Samsung Electro-Mechanics, while the KODEX SK Hynix Single Stock Leverage ETF surpassed most individual stock trading volumes, excluding Samsung Electro-Mechanics. The KODEX Samsung Electronics Single Stock Leverage ETF also attracted significant attention, recording higher trading volumes than Naver.
The preference for leverage among domestic investors is also evident in overseas markets. According to the Korea Securities Depository, South Korean retail investors, known as “Seohak Ants,” net purchased $1.75 billion (approximately 2.6 trillion won) worth of SOXL (Direxion Daily Semiconductor Bull 3X Shares), which tracks the Philadelphia Semiconductor Index threefold, from June 8 to 12. This amount is nearly nine times greater than the second-highest net purchase during the same period.
SOXL is a high-risk product that aims to triple the daily returns of the Philadelphia Semiconductor Index, which includes global semiconductor companies such as Nvidia, TSMC, AMD, and Micron. While South Korean investors had been net sellers of U.S. stocks until the first week of June, they shifted to net buyers in the second week, indicating a renewed aggressive investment strategy. This shift is attributed to expectations of improved semiconductor market conditions and increased investments in artificial intelligence (AI).
However, investors should exercise caution with leveraged ETFs, as they are designed to multiply the daily returns of their underlying assets. Increased volatility can lead to returns that deviate from expectations. In particular, during periods of significant downward volatility, a phenomenon known as 'negative compounding' can occur, resulting in losses that exceed those of the underlying assets.
* This article has been translated by AI.
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