A few days ago, I wrote about the ebb of leverage in South Korea's retail investor leveraged ETFs for SK Hynix. At that time, according to Bloomberg, among the seven SK Hynix leveraged ETFs, trading volume had fallen from a peak of nearly 800 million shares at the end of July to below 100 million shares.
Now the latest data further confirms this trend. Specifically, the KODEX SK Hynix single-stock leveraged ETF saw its daily trading volume exceed 600 million units at the end of July, but quickly dropped to just a few tens of millions after August. Compared with the peak, it has shrunk by more than 90%.
This indicates that the most aggressive round of deleveraging in the South Korean market is indeed nearing its end.
After raising the minimum cash guarantee margin at the end of July, many retail investors who previously relied heavily on margin to repeatedly trade single-stock leveraged ETFs exited the market. Combined with the forced liquidation that had been close to 1 trillion won for two consecutive months, the amount of leveraged positions that could still be liquidated has clearly decreased.
But this may not be entirely good news for SK hynix $SKHY . Previously, these leveraged funds would create liquidation pressure during downturns, and during upswings as well, the same
This is a very important incremental buy. Now, trading volume has fallen from hundreds of millions of shares to tens of millions of shares. The risk of a chain reaction of liquidations has indeed decreased, but hopefully the high-leverage momentum-chasing and value-catching funds disappear as well.
Korean retail investors’ margin balances have already fallen to this year’s low, while foreign capital continues to net sell Korean stocks. Next, after deleveraging ends, if funds do not rebound, the decline in trading volume will only make liquidity in the Korean market worse. $
The current Korean market is very similar to the cryptocurrency market at the end of last year.