November 30, 2024

• 

A bird`s eye view of South Korea`s financial district of Yeouido in western Seoul. (Yonhap)

South Korean retail investors have been bagging up overseas exchange-traded funds in recent weeks as the global stock market has been struggling under bear market signals, data showed Tuesday.

Retail investors interested in overseas investments have added more high-return, high-risk ETFs to their portfolios, seeking to profit from the volatile global market.

Of the top 10 overseas investments from local investors from July 13 to Aug. 12, seven were ETFs, according to the latest data compiled by the Korea Securities Depository.

Investors bought a net $85.8 million worth of the ProShares UltraPro Short QQQ (SQQQ), which is a 3X leveraged inverse ETF that tracks the Nasdaq 100 index. The product, which is heavily weighted toward technology and telecommunications stocks, ranked No.2 in popularity on the list.

Leveraged 3X ETFs are funds that track a wide variety of asset classes, such as stocks, bonds and commodity futures, and apply leverage in order to gain three times the daily or monthly return of the respective underlying index. Inverse ETFs on the other hand, use various derivatives to profit from a decline in the value of an underlying benchmark.

The only product that outranked ProShares UltraPro Short QQQ was stocks of Chinese mining company Tianqi Lithium, which debuted on the Hong Kong market last month. Investors bought a net $152.2 million of Tianqi Lithium stocks in the cited period, making it the most popular overseas investment for individuals.

The Direxion Daily Semiconductor Bull 3X ETF (SOXL), which is a 3X leveraged ETF, ranked No.3, with investors buying a net $40.8 million. The Direxion Daily 20+ Year Treasury Bull and Bear 3X ETFs -- which follow a market value-weighted index that includes publicly issued US Treasury securities with a remaining maturity of greater than 20 years -- came at No. 4 with a net $38 million.

Schwab US Dividend Equity ETF, JPMorgan Equity Premium Income ETF, ProShares Ultra VIX Short-Term Futures ETF and ProShares UltraShort Bloomberg Natural Gas came from No. 6 to No. 9, respectively, with its investments ranging from a net $17.2 million to 23.5 million.

Besides Tianqi Lithium, there were only two other stocks on the list. US tech company Intel came at No. 5 with a net of $24.3 million, and Chinese e-commerce giant Alibaba ranked at No.10 with a net of $16.5 million.

This contrasts with earlier KSD data that showed US e-commerce giant Amazon as an investor favorite here, with individuals purchasing a net $227.4 million of its shares through the entire 2021.

“Retail investors are trying to amplify their investments by increasing leverage under the current market conditions,” Seol Tae-hyun, an analyst at DB Financial Investment, said.

“But under current market conditions, it is best for local investors to hold onto such inverse ETF investments for the short-term only,” he added.

By Jung Min-kyung (mkjung@heraldcorp.com)