South Korean Retail Investors Rush to Buy Semiconductor Leveraged ETFs Amid Market Downturn, Purchasing Over 4.5 Trillion Won in a Single Day

On Friday, July 24, shares of Samsung Electronics and SK Hynix in South Korea dropped more than 7% each, causing related leveraged ETFs to fall 15% to 16% in a single day. Despite the market panic, retail investors rushed in to buy the dip, recording net purchases exceeding 450 billion Korean won. Market analysts attribute this surge not only to expectations of a rebound from oversold levels but also to an impending regulatory tightening. The Financial Services Commission of South Korea announced on the same day that new margin rules for individual stock leveraged products, originally scheduled for August, would be accelerated to take effect on July 31. Under the new rules, the minimum cash deposit requirement will increase sharply from 10 million won to 30 million won. After the regulation takes effect, investors must hold at least 30 million won in cash to open new positions or add to existing ones in leveraged products tied to domestic or foreign stocks. Additionally, if investors use proceeds from selling collateral securities to fund their margin accounts, the cash must be fully settled and credited before it counts toward the margin requirement. The minimum margin level must also be maintained for a certain period after trading. Following the announcement, online investment forums saw a surge in discussions, with many retail investors stating they wanted to 'short inverse products first, then use leverage to lower their average cost' or 'take advantage of the current lower entry barrier before the new rules make it harder to average down.' This reflects a clear strategy among retail investors to position themselves before the July 31 deadline. According to data from the Korea Exchange and KOSCOM CHECK, from July 21 to 23, retail investors had net sold 5.47 trillion won worth of leveraged products across 14 different securities. However, on July 24, the trend reversed dramatically. Seven leveraged products tracking Samsung Electronics attracted 1.038 trillion won in buying, while seven tracking SK Hynix drew in 3.5 trillion won, resulting in a combined net inflow of 4.538 trillion won—nearly recovering all the outflows from the previous three days. The buying spree occurred on what became known as 'Black Friday' in the Korean stock market, with the KOSPI index plunging over 5%. Samsung Electronics closed down 7.59%, and SK Hynix fell 8.34%. Leveraged ETFs based on these two stocks also dropped 15% to 16%. While the KODEX SK Hynix Leverage ETF managed to hold above 13,015 won, the other 13 leveraged products fell into the 11,000 to 12,000 won range—nearly half their 20,000 won issue price on May 27. This sharp decline, rather than deterring investors, attracted a wave of retail buying. The combination of bargain-hunting sentiment and regulatory urgency created a perfect storm for a massive retail-led rebound in leveraged ETFs.