Impact of US Tariffs and Key Economic Activities on Individual Investment
The imposition of tariffs by the Trump administration has led to a sharp rise in US Treasury yields, prompting South Korean retail investors to actively invest in 30-year US Treasury ETFs. As bond prices have fallen, investors are seizing the opportunity to buy at low points. Over three days, individual investors net purchased 32 billion won in triple-leverage ETFs, with investments reaching $17.04 million in just 11 days. Analysts note the swift market adaptation by retail investors.
Amid the tariff storm in the US stock market, Korean individual investors continue to expand their investments. During the first quarter of 2023, net purchases by these investors in US stocks reached $10.9 billion, with a significant portion directed toward high-risk leveraged ETFs. This investment method carries substantial risk as both gains and losses could triple. The Korea Securities Depository and the Bank of Korea caution the need for diversification in investment and advise avoiding excessive concentration in leveraged ETFs. Owen Lamont, Vice President of Arcade Asset Management, compares the investment patterns of these investors to the Netflix drama 'Squid Game,' highlighting the associated risks.
Expectations are rising for a rebound following an 18.9% decline in the S&P 500 index. Due to exchange rate fluctuations, Hana Bank has reduced the handling limit for overseas alternative investment derivatives by 5 trillion won. The government has announced plans to bolster the capital of the Export-Import Bank of Korea to support export companies affected by tariffs. Separately, even as credit card loan margins widen, Samsung Asset Management has solidified its industry-leading position with a 5.4 trillion won increase in ETF net assets.
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