In the two trading days following the implementation of the increased margin requirements, trading activity in South Korean single-stock leveraged and inverse ETFs plummeted, with trading volume falling to only about one-tenth of its previous peak. Analysts stated that this measure to restrict speculative capital inflows has begun to show results, and the trading pattern of retail investors continuously buying leveraged products when the underlying stock price falls has changed.
According to the Korea Exchange on March 3rd, the total trading volume of the 16 single-stock leveraged and inverse ETFs listed on the KOSPI market related to Samsung Electronics and SK Hynix was 1.2388 trillion won, a 58.6% decrease from the 2.9907 trillion won on March 31st, the day the measures were implemented.
Previously, South Korean regulators had raised the minimum cash margin requirement for single-stock leveraged ETF investors from 10 million won to 30 million won. Compared to the 12.4485 trillion won trading volume on the last trading day before the measures were implemented (March 30th), the current trading volume has dropped to about one-tenth.
The cooling of retail investor sentiment is particularly evident. Data shows that retail investors' trading volume in single-stock leveraged and inverse products was only 250.7 billion won, less than a quarter of the 929.9 billion won on the 31st of last month.
