South Korea's increase in margin thresholds for leveraged ETFs has taken effect, with the trading volume of single-stock leveraged products dropping to one-tenth of its peak

After South Korea raised the margin requirements for single-stock leveraged ETF investors, the trading activity of related products has significantly decreased, with trading volume dropping to about one-tenth of the previous peak level.

According to data from the Korea Exchange, the total trading volume of 16 single-stock leveraged and inverse ETFs related to Samsung Electronics and SK Hynix in the KOSPI market was 12.388 trillion won within two trading days after the new measures were implemented, a decrease of 58.6% compared to 29.907 trillion won on the day the measures were implemented (July 31).

Previously, South Korean regulators raised the minimum cash margin requirement for single-stock leveraged ETF investors from 10 million won to 30 million won. Compared to the trading volume of 124.485 trillion won on the last trading day before the measures were implemented (July 30), the current trading scale of related products has dropped to about one-tenth.

The enthusiasm of retail investors has cooled significantly. Data shows that the trading volume of retail investors in single-stock leveraged and inverse products has fallen to 250.7 billion won, less than a quarter of the 929.9 billion won on July 31.

Analysts indicate that after raising the margin threshold, the effect of restricting speculative capital inflow has begun to show, and the trading pattern of retail investors continuously buying leveraged products during declines in the underlying stocks is changing.