As the KOSPI continues to swing between the 8,000 and 7,000 levels after a short-lived surge, investors' moves to brace for a market downturn have become increasingly evident. Inverse exchange-traded funds (ETFs) that bet on a KOSPI decline dominated the list of most-traded ETFs in June, with trading volume also rising sharply. As semiconductor stocks plunged amid a U.S.-driven correction in technology shares, individual investors aggressively bought single-stock leveraged ETFs, actively placing bets on the directional movement of specific stocks.
According to the Korea Exchange on Wednesday, four inverse ETFs—KODEX 200 Futures Inverse 2X, KODEX Inverse, SOL SK hynix Futures Single-Stock Inverse 2X, and TIGER 200 Futures Inverse 2X—ranked among the top five by trading volume out of the 50 most-traded ETFs during June. In particular, the top two spots by trading volume were both taken by KODEX 200 Futures Inverse 2X and KODEX Inverse, which bet on a KOSPI decline.
Trading volume also grew significantly. The average daily trading volume of the four inverse ETFs that topped the list rose 19.3%, from 9.566 billion units in May to 11.41758 billion units in June. Average daily trading value surged 48% over the same period, from 1.901 trillion won to 2.8171 trillion won. In May, four inverse ETFs were also among the top 10 by trading volume, but as both trading volume and value increased in June, demand to hedge against a market downturn is interpreted to have grown even stronger.
Investors' interest in inverse ETFs continued into July. Based on trading volume for July 1-2, KODEX 200 Futures Inverse 2X and KODEX Inverse ranked first and second, respectively. SOL SK hynix Futures Single-Stock Inverse 2X ranked third by trading volume, with products betting on declines in the KOSPI and semiconductors dominating the top positions.
The market attributes this to increased demand for risk aversion in preparation for the possibility that the recently surging KOSPI may enter a period of consolidation. In addition, the National Pension Service's temporary suspension of domestic stock rebalancing, which ended in late June, is also cited as a factor that dampened investor sentiment. Analysts say this reflects concerns that supply-demand pressure could increase, centered on large-cap stocks, as expectations spread that the National Pension Service may begin adjusting its domestic stock weighting from July. Chung Eun-kyeong, Minister of Health and Welfare, said at the National Pension Fund Management Committee that day, "We will adjust the rebalancing rules to enhance profitability and stability while mitigating the impact on the market," adding, "Even if rebalancing occurs, we will monitor closely to minimize the impact."
In contrast, single-stock leveraged ETFs of the "top two" semiconductor stocks saw buying inflows, showing a divergent pattern. Amid the recent correction in semiconductor stocks, individual investors moved to buy on the dip. On July 1, individuals net-bought 134.8 billion won of KODEX Samsung Electronics Single-Stock Leverage and 98.7 billion won of TIGER Samsung Electronics Single-Stock Leverage. They also net-bought 208.4 billion won and 69.1 billion won of KODEX SK hynix Single-Stock Leverage and TIGER SK hynix Single-Stock Leverage, respectively. However, the Samsung Electronics single-stock leveraged ETFs plunged about 19% that day, extending their decline for a second consecutive day. As a result, they fell below the 20,000 won base price set at listing. The SK hynix single-stock leveraged ETFs also plummeted about 30% that day from the previous trading session. Retail investors who bought the day before are estimated to have suffered heavy losses.
Park Woo-yeol, senior researcher at Shinhan Securities, said, "The average level of the KOSPI 200 Volatility Index (VKOSPI) this year is 57.3, having entered a phase of persistently high volatility," adding, "To avoid losing invested capital, discipline and risk management are important, and it is necessary to seek out low-volatility products and defensive stocks."
