KOSDAQ is experiencing a rare positive trend. While the KOSPI index struggles, KOSDAQ has seen three consecutive days of gains. Analysts suggest this may be linked to the recent implementation of two rounds of supplementary regulations on single-stock leveraged exchange-traded funds (ETFs) by financial authorities last month. As trading volume and value have sharply decreased, short-term funds that were previously concentrated in large semiconductor stocks are showing signs of diversifying into KOSDAQ. Market observers believe this could be an early indication of a regulatory 'balloon effect' taking shape.
According to the Korea Exchange, the trading volume for 16 single-stock leveraged and inverse ETFs based on Samsung Electronics and SK Hynix reached 138.99 million shares on August 4. This represents a 6.3% decrease from the previous trading day on August 3, which saw 148.30 million shares traded. Compared to the trading volume of 1.23 billion shares on July 30, just before the regulations took effect, this marks a staggering 88.7% drop. The trading value also fell to 1.25 trillion won, less than half of the 3 trillion won recorded on the first day of the increased deposit requirement on July 31.
The decline in trading activity is particularly evident in major products. The 'KODEX SK Hynix Single-Stock Leverage' ETF saw its trading volume plummet from 488.90 million shares on July 30 to just 49.72 million shares on August 4, a decrease of 89.8%. Similarly, the 'KODEX Samsung Electronics Single-Stock Leverage' ETF dropped from 162 million shares to 19.58 million shares, a decline of 87.9%. On this day, no single-stock leveraged ETF exceeded 1 trillion won in trading value.
This trading slowdown is attributed to the tightening of regulations by financial authorities. Starting July 31, the authorities raised the minimum deposit requirement for single-stock leveraged ETFs from 10 million won to 30 million won and eliminated the previous practice of recognizing substitute securities such as stocks, ETFs, and bonds when calculating the deposit. This has raised the entry barrier for investors, leading to a decrease in short-term trading demand.
As a result, there are changes in the flow of funds in the stock market. Funds that were previously concentrated in large semiconductor stocks through single-stock leveraged ETFs are now shifting towards KOSDAQ and growth stocks, which have been relatively overlooked. Lee Jae-won, a researcher at Yuanta Securities, noted, "The anticipated 'spillover effect from the easing of concentration in large semiconductors to smaller growth stocks' is becoming a reality following the implementation of the single-stock leveraged ETF regulations last week. This indicates a period of warming across the broader market."
Indeed, KOSDAQ closed at 780.72, up 43.37 points (5.88%) from the previous trading day. This marks three consecutive days of gains since the implementation of the single-stock leverage regulations. Notably, the biotechnology sector led the rise, with stocks like Alteogen (up 9.29%), ABL Bio (up 13.24%), and LigaChem Bio (up 15.20%) showing strong performance.
Analysts also point to the increased price attractiveness of KOSDAQ, which had previously underperformed compared to KOSPI, as a factor stimulating buying interest. Lee Jae-won added, "During the sharp decline, stocks whose earnings estimates did not drop as much as their prices have become attractive due to excessive valuation declines. Additionally, policies such as the announcement of pension fund benchmarks and premium index launches are moving from announcement to actual implementation."
* This article has been translated by AI.
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