$1 Billion Outflow! Monthly Net Outflow Appears for the First Time in South Korean Chip Leverage ETF as Retail Investors Accelerate Shift to U.S. Stock Indexes for Hedging

According to Zhitong Finance APP, as investor enthusiasm for artificial intelligence (AI) trading gradually subsides, coupled with regulatory agencies introducing measures to curb overheated demand, leveraged ETFs linked to South Korean chip giants such as Samsung Electronics (SSNLF.US) and SK Hynix (SKHY.US) are experiencing substantial capital outflows. Meanwhile, amid intensified market fluctuations on the KOSPI, domestic Korean retail investors are noticeably shifting towards relatively stable US stock index ETFs for risk aversion.

Compiled data shows that since August, leveraged ETFs tracking Samsung Electronics have seen a cumulative net outflow of $381 million, while leveraged ETFs tracking SK Hynix have experienced net outflows of $601 million, with total outflows nearing $1 billion. This marks the first monthly net outflow for such products since they were launched at the end of May this year.

These leveraged ETFs aim to track twice the daily stock price movement returns of Samsung Electronics and SK Hynix, attracting a large inflow of funds seeking exposure to the AI chip rally upon launch. However, these products have also been criticized for amplifying market volatility—during the global AI sector pullback in July, the KOSPI index in South Korea experienced a historic 22% sell-off, with market swings intensifying significantly.

Subsequently, Korean regulatory agencies have tightened oversight on leveraged ETFs, including raising minimum margin requirements for new investors and mandating that new investors must complete a five-day simulated trading period before participating officially. Regulatory tightening combined with cooling AI trading sentiment has further increased outflow pressure on leveraged products.

KOSPI Plunges, Retail Investors Flock to US Equity Index ETFs

Ongoing turbulence in the domestic Korean stock market is further pushing investors toward overseas assets. According to data released by ETF Check on August 25, among domestically listed ETFs in Korea on August 24, nine out of the top ten products by net inflow invested in US assets, with funds heavily flowing into ETFs tracking major US indices such as the S&P 500 and Nasdaq.

Specifically, the TIGER US Nasdaq 100 ETF recorded a single-day net inflow of 50.2 billion KRW, ranking first among all Korean-listed ETFs; the KODEX US Nasdaq 100 ETF had a net inflow of 49.6 billion KRW; the TIGER US S&P 500 ETF saw a net inflow of 31.6 billion KRW; and the KODEX US S&P 500 ETF netted 29.9 billion KRW. In addition, the TIGER US Philadelphia Semiconductor Nasdaq ETF, which focuses on the US Philadelphia Semiconductor Index, posted a net inflow of 29.6 billion KRW, while the ACE US Large Cap Tech TOP7 Plus ETF had a net inflow of 19.1 billion KRW, highlighting the focus on large US technology stocks.

Analysts pointed out that this trend is closely related to the sharp decline in the Korean stock market. On August 24, the KOSPI index fell by 3.12%, with Korea’s two heaviest weighted stocks, Samsung Electronics and SK Hynix, plummeting by 8.7% and 3.41%, respectively. Faced with significant volatility in the domestic stock market, investors are clearly gravitating towards US equity index ETFs to diversify risk.

However, looking at fund flows over the past week, Korean retail and institutional investors have chosen differently. According to ETF Check data, over the past week, the Korean-listed ETF most heavily bought by retail investors was the TIGER US S&P 500 ETF, with a net purchase amount of 198.2 billion KRW; the KODEX US S&P 500 ETF followed with 106.2 billion KRW, and the KODEX US Nasdaq 100 ETF with 102.7 billion KRW, all ranking high among retail inflows.

In contrast, during the same period, institutional investors’ largest net purchase was in the KODEX 200 Weekly Covered Call ETF, with a net buy of 78 billion KRW; followed by the KODEX SK Hynix Single Stock Leveraged ETF at 61.4 billion KRW, and the KODEX 200 ETF at 53.3 billion KRW. Institutional funds remain mainly concentrated in domestic Korean indices and related strategic products.

Industry insiders in financial investment pointed out that amidst the unstable performance of the Korean stock market, already subdued investment sentiment is prompting retail investors to seek safer investment options. One source stated: “In the first half of the year, retail investors would step in to buy on KOSPI dips, but in the future, unless the KOSPI shows a sustained upward trend, it’s unlikely that the attitude of retail investors will change.”