So-called "double-inverse" products, which bet twice on a market decline, plunged in unison to record lows as the KOSPI rose in 14 of 17 trading sessions this month amid easing uncertainty surrounding the Iran war. With the market widely expecting the KOSPI's rally to continue after it broke through the 6,500 level intraday, despite lingering geopolitical risks from the Middle East, analysts say the likelihood of further declines in double-inverse exchange-traded funds (ETFs) is growing.
According to the Korea Exchange on the 23rd, the KODEX 200 Futures Inverse 2X ETF, a leading double-inverse product, closed at 177 won, down 4 won (2.21%) from the previous day, setting a new record low. The product has fallen continuously since breaking below 1,000 won at 980 won on October 2 last year, dropping to one-tenth of that level in just six months.
According to Koscom ETF Check, all of the top decliners over the past week were double-inverse products. Major inverse products plunged in succession, including PLUS 200 Futures Inverse 2X ETF (-8.50%), RISE 200 Futures Inverse 2X ETF (-8.16%), and KODEX 200 Futures Inverse 2X ETF (-7.33%). These products are designed to deliver twice the return when the index declines but generate twice the loss when the index rises.
Retail investors' buying patterns are also shifting. The KODEX 200 Futures Inverse 2X ETF, which had frequently topped the weekly net-buying ranking even during market uptrends, slipped to seventh place. Taking the top spot instead was TIGER MSCI Korea TR, which attracted 425.9 billion won over the past week, while the second through sixth spots were all occupied by ETFs betting on index gains.
With the KOSPI having recovered most of its losses from the Iran war and expected to continue its upward trend, analysts say further declines in double-inverse ETFs will inevitably widen losses for retail investors. Retail investors have net purchased 131 billion won worth of the KODEX 200 Futures Inverse 2X ETF over the past week, continuing their bet on a market decline.
"Looking at historical cases, after breaking through previous peaks, markets have risen 48-60% over three months and 33-37% over five months," said Lee Eun-taek, an analyst at KB Securities. "With the KOSPI approaching the 6,500 resistance level, a new all-time high, faster than expected, the possibility of a strong bull market unfolding going forward is high."
