Citigroup estimates Korean retail investors lost approximately $38.7 billion (56.3 trillion won) from leveraged exchange-traded fund (ETF) investments during the recent market correction, according to analysis released on the 29th. The investment bank's Asia Pacific Trading Strategy Head Mohamed Apabhai reported that leveraged ETF market capitalization based on Korean assets peaked at approximately $52.5 billion (76.37 trillion won) on the 22nd of last month before declining to around $19 billion (27.64 trillion won) recently. The estimated losses reflect the sharp contraction in leveraged ETF market cap during a broader correction in Korean equities, with SK Hynix-linked products experiencing the steepest declines.
Citigroup Estimates $38.7 Billion Loss in Korean Leveraged ETFs
Citigroup Global Markets Securities' Mohamed Apabhai disclosed in a market report to institutional investors on the previous day that Korean asset-based leveraged ETF market capitalization declined by approximately $33.5 billion (48.7 trillion won) from its peak. The analysis noted that an additional $6.2 billion (9.02 trillion won) in new positions were established after the peak, bringing total estimated retail investor losses to approximately $38.7 billion (56.3 trillion won). The report represents market commentary from Citigroup's equity trading strategy division rather than official research from the bank's research team.
SK Hynix Leveraged ETF Records Largest Market Cap Decline
SK Hynix leveraged ETF market capitalization decreased by approximately $17 billion (24.74 trillion won) from its peak, representing the largest decline among individual assets. KOSPI 200-tracking leveraged products declined by $10.5 billion (15.28 trillion won), while Samsung Electronics leveraged ETFs fell by over $5 billion (7.28 trillion won). The market cap contraction across these major products accounted for the bulk of the overall leveraged ETF decline during the correction period.
Retail Investors Continue Buying SK Hynix Despite Losses
Individual investors net purchased over $16 billion (23.27 trillion won) of SK Hynix since the 23rd of last month, according to Citigroup's analysis. These purchases resulted in estimated losses of approximately $5.7 billion (8.3 trillion won) during the period. Citigroup Global Markets Securities calculated the estimated average purchase price at 2.28 million won, with a current loss rate of 31.6%. As of 10:15 AM on the 29th, SK Hynix traded at 1.492 million won, down 3.74% from the previous day. Individual investors also incurred estimated losses of approximately $2.4 billion (3.5 trillion won) on Samsung Electronics purchases during the same period.
Credit Margin Balance Remains Elevated
Credit margin balance in Korea's two main stock markets stood at 32.7 trillion won as of the 27th, down from a peak of 38.6 trillion won on the 24th of last month. Citigroup's analysis estimated that only approximately 65% of credit margin positions accumulated since the beginning of the year have been liquidated. The correlation between credit margin balance and the KOSPI 200 index reached 92.2%, indicating a close relationship between margin borrowing increases during market rallies and decreases during declines through forced selling and debt reduction.
Citigroup Forecasts Further Decline in Leveraged ETF Market Cap
Mohamed Apabhai stated that leveraged ETF-related losses are expected to increase further, projecting that leveraged ETF product market capitalization could fall below $8 billion (11.63 trillion won) before year-end. He noted that individual investors have not yet engaged in panic selling and assessed that it is premature to adopt an optimistic view on the KOSPI. Apabhai presented a baseline scenario of KOSPI 200 futures initially declining to the 888 level, with a potential further drop to 754.6 if that level breaks, reflecting macroeconomic variables and fair value. Citigroup's asset market bubble indicator showed that Korean stocks have moved from the 'bubble' (overheated) zone to the border between 'overvalued' and 'fair value,' but have not yet entered undervalued territory.
FAQ
What losses did Korean retail investors incur from leveraged ETFs according to Citigroup?
Citigroup estimates Korean retail investors lost approximately $38.7 billion (56.3 trillion won) from leveraged ETF investments during the recent market correction. The investment bank's analysis showed leveraged ETF market capitalization peaked at $52.5 billion on the 22nd of last month before declining to around $19 billion, with an additional $6.2 billion in new positions established after the peak.
Which leveraged ETF product experienced the largest market cap decline?
SK Hynix leveraged ETF market capitalization decreased by approximately $17 billion (24.74 trillion won) from its peak, representing the largest decline among individual assets. KOSPI 200-tracking leveraged products declined by $10.5 billion, while Samsung Electronics leveraged ETFs fell by over $5 billion during the same period.
How much did individual investors lose on SK Hynix purchases since the 23rd of last month?
Individual investors net purchased over $16 billion of SK Hynix since the 23rd of last month and incurred estimated losses of approximately $5.7 billion (8.3 trillion won) on these purchases. Citigroup calculated the estimated average purchase price at 2.28 million won, with a current loss rate of 31.6%.
