Daily turnover in single-stock leverage products tied to Samsung Electronics and SK hynix has plunged more than 90% from the levels seen shortly after their launch. As the products approach their third month on the market, all 16 are trading below their listing reference price, and more than 1 trillion won has flowed out of the largest ones over the past month.
Combined daily turnover for the 16 single-stock leverage and inverse 2X products tied to Samsung Electronics and SK hynix totaled 842.9 billion won as of the previous session, according to Korea Exchange data released on the 26th. That marks a 90.4% drop from the three-month daily average of 8.7696 trillion won.
Prices have also failed to recover to their launch levels. All 16 products, which listed on May 27 this year, closed on the 26th below their listing reference price of 20,000 won. Prices of the long leverage products rebounded recently as shares of Samsung Electronics and SK hynix bounced back, but the gains were not enough to offset earlier accumulated losses.
Both the long and inverse products are underwater because the underlying stocks have swung sharply up and down since the launch. Single-stock leverage products track twice the daily return of the underlying asset, not its return over a longer period. When a stock repeatedly rises and falls, so-called negative compounding accumulates, meaning the product's price may not return to its original level even if the underlying stock recovers its earlier price.
As losses piled up, money has been leaving the largest products. Over the past month, from July 26 to August 25, KODEX Samsung Electronics Single Stock Leverage saw net outflows of 399.4 billion won, while KODEX SK hynix Single Stock Leverage lost 270.2 billion won. Over the same period, SOL SK hynix Futures Single Stock Inverse 2X saw 142.7 billion won in net outflows and TIGER SK hynix Single Stock Leverage 128.4 billion won. TIGER Samsung Electronics Single Stock Leverage lost another 107.5 billion won. Net outflows from the five products with the largest withdrawals totaled 1.0482 trillion won.
Investment money has instead shifted into exchange-traded funds that track benchmark indexes. Over the same period, TIGER U.S. S&P 500 drew net inflows of 1.0434 trillion won, the most of any ETF. KODEX U.S. Nasdaq 100 took in 702.4 billion won and KODEX 200 661.0 billion won. TIGER U.S. Nasdaq 100 followed with 503.0 billion won, KODEX KOSDAQ 150 with 462.5 billion won and KODEX U.S. S&P 500 with 379.7 billion won. The pattern suggests investor demand has moved from products that make double-sized bets on the short-term direction of a single stock to those spreading money across domestic and overseas benchmark indexes.
Tighter regulation has accelerated the drop in trading. As concerns grew over overheating and investor losses in single-stock leverage products, financial authorities raised the minimum deposit to 30 million won in cash starting on the 31st of last month. From the 19th of this month, new investors must complete a total of five hours of simulated trading over five trading days before they can trade the products. Partly as a result, KOSPI swings have narrowed considerably this month, in contrast to last month, when sidecars and circuit breakers were triggered every other day. With the market showing some signs of stabilizing, however, the government has slowed work on further measures, including a cap managing each investor's exposure at 20% of their total holdings and the introduction of emergency market stabilization steps.
