Retail investors bought more than 450 billion won worth of single-stock leverage products tracking Samsung Electronics (005930.KS) and SK hynix (000660.KS) in a single day, after selling them off for three consecutive days. The buying appears to reflect a sharp drop in leverage product prices amid a plunge in semiconductor stocks, along with so-called "averaging down" demand ahead of an increase in minimum deposit requirements.
According to the Korea Exchange and Koscom CHECK on the 26th, retail investors net sold a total of 547.171 billion won worth of 14 single-stock leverage products over three consecutive days from the 21st to the 23rd.
Seven Samsung Electronics single-stock leverage products saw net selling of 57.641 billion won on the 21st, 76.952 billion won on the 22nd, and 24.253 billion won on the 23rd.
Seven SK hynix single-stock leverage products also recorded net selling of 162.161 billion won, 45.793 billion won, and 180.372 billion won over the same period, respectively.
But the mood shifted sharply on the 24th. On that day alone, retail investors net bought 103.810 billion won worth of the seven Samsung Electronics single-stock leverage products and 350.027 billion won worth of the seven SK hynix single-stock leverage products. Combined net buying of the two product groups reached 453.836 billion won.
This means investors bought back in a single day a volume comparable to what they had sold off over three days. As a result, retail investors' cumulative trading from the 20th to the 24th, which had tilted toward net selling, swung back to net buying.
Over this period, retail investors net bought 12.511 billion won worth of the seven Samsung Electronics single-stock leverage products and 103.121 billion won worth of the seven SK hynix single-stock leverage products. The cumulative net buying of the two product groups totaled 115.632 billion won.
The 24th, when retail buying surged, was a "Black Friday" that saw Samsung Electronics and SK hynix shares fall by 7 to 8 percent. As the prices of the underlying assets plunged, the declines in the single-stock leverage products, which track returns at double the rate, were even steeper.
The flagship product "KODEX Samsung Electronics Single-Stock Leverage" fell 15.10 percent that day, while "SK hynix Single-Stock Leverage" plunged 16.25 percent. "TIGER Samsung Electronics Single-Stock Leverage" and "TIGER SK hynix Leverage" also declined 15.39 percent and 16.17 percent, respectively.
The sharp price drops over a short period are seen as having drawn in a large wave of bargain hunting aimed at a rebound. Demand from investors seeking to make additional purchases before regulations tightening the minimum deposit for single-stock leverage products also appears to have played a role.
The Financial Services Commission (FSC) decided to move up the tightening of minimum deposit requirements, originally scheduled for August, to the 31st, in order to swiftly stabilize demand for single-stock leverage products.
Accordingly, from the 31st, the minimum deposit required to invest in single-stock leverage products will be raised to 30 million won from the current 10 million won. Investors will need to hold at least 30 million won in cash to newly invest in or make additional purchases of domestic and overseas single-stock leverage products.
Ahead of the regulation's implementation, responses vowing to rush into "averaging down" have flooded investor communities. Posts included: "I'm selling inverse products and increasing my leverage share, with the idea of averaging down when prices fall," and "Since it will be harder to buy once the deposit goes up, if you want to average down, now is the time."
Ultimately, the combination of a bargain-buying opportunity created by the plunge in semiconductor stocks and last-minute investment demand ahead of the minimum deposit increase is seen as having driven retail investors, who had sold off leverage products for three days, to return to large-scale buying in a single day.
