Korean retail investors aggressively bought semiconductor blue chips at depressed prices as the domestic stock market plunged on geopolitical tensions stemming from the Middle East.
Individual investors purchased not only domestic stocks but also 2x leveraged exchange-traded funds listed in Hong Kong, treating the heightened volatility as a buying opportunity.
According to the Korea Securities Depository on April 4, Korean retail investors heavily bought 2x leveraged ETFs tracking Samsung Electronics and SK Hynix on the Hong Kong exchange on April 2-3, following U.S. and Israeli airstrikes on Iran.
Investors net purchased $3.33 million of CSOP Asset Management's "CSOP SK Hynix Daily 2X Leverage" and $2.83 million of "CSOP Samsung Electronics Daily 2X Leverage," ranking first and second respectively in Hong Kong market net purchases for March.
Custody amounts also rose sharply. As of April 2, Korean investors held $95.74 million in the SK Hynix 2x ETF and $80.37 million in the Samsung Electronics 2x ETF. These figures represent increases of 46.48% and 106.77% respectively from a month earlier, when holdings stood at $65.36 million and $38.87 million.
During the same period, SK Hynix's ranking by custody amount climbed from 10th to 7th, while Samsung Electronics jumped from 16th to 10th.
The two products surged 79.48% and 34.26% respectively in February alone, delivering substantial gains to investors. However, both plunged 21.54% and 21.30% over the past two trading days as Middle East tensions escalated, erasing much of those gains. The declines far exceeded those of the underlying stocks.
Leveraged ETFs track multiples of daily returns for indices or individual stocks. Because they reflect daily fluctuations, losses can accumulate rapidly when volatility increases.
Despite these risks, Korean investors are betting abroad to maximize gains if share prices rebound. "This appears to be an expansion of the 'averaging down' strategy—lowering average purchase prices during sharp declines—into high-multiple products," said an official in the financial investment industry.
Retail buying of semiconductors continued in the domestic market. Over the first two trading days of April, as the KOSPI fell 1,150 points, individuals net purchased 2.83 trillion won ($2.1 billion) of Samsung Electronics and 1.49 trillion won of SK Hynix.
In the ETF market during the same period, investors bought 175.8 billion won of "TIGER Semiconductor TOP10 Leverage" and 117.6 billion won of "TIGER Semiconductor TOP10," both of which have high weightings in the two stocks.
Samsung Electronics and SK Hynix closed down 22,900 won (11.74%) and 90,000 won (9.58%) respectively on April 4. The gap between intraday highs and lows reached approximately 14% for Samsung Electronics and 13% for SK Hynix.
"The domestic market is currently plunging due to the Iran situation, but even without that, the period around the second quarter is vulnerable to risks," said Lee Eun-taek, a researcher at KB Securities.