Downturn in South Korea's Stock Market Affects Leveraged ETF Trading
In August, trading activities involving leveraged and inverse ETFs in the South Korean stock market witnessed a significant slump. According to the Korea Exchange, KODEX Leverage's average trading value fell by 23.66% from the previous month, totaling 508.7 billion won. This decline suggests a growing investor caution towards betting on short-term market directions. The Kospi Index, having surged in June, declined by 1.83% in August, which also contributed to the reduced trading volume.
As the Kospi and Kosdaq indices find themselves in a holding pattern, individual investors are withdrawing capital from leveraged ETFs, with net outflows of 92 billion won from KODEX Leverage and 88.6 billion won from KODEX Kosdaq150 Leverage. Instead, investors are seeking steadier alternatives, allocating 171.3 billion won into parking-type ETFs like KODEX Money Market Active. Additionally, there is a noticeable shift in focus towards the U.S. market, as investments flow into ETFs such as the TIGER US S&P500.
The securities sector anticipates this cautious trend to persist, although policy changes might drive up the market. With the recent unveiling of governmental stock market reform initiatives, there is cautious optimism about whether these policies might reinvigorate the domestic stock market.
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