South Korean retail investors withdrew funds from the stock market in July as investor deposits fell to 111.2825 trillion won on July 14, with the lowest point on July 10 at 105.5758 trillion won — the weakest level since February 20, according to the Korea Financial Investment Association. The decline coincided with circuit breakers halting KOSPI trading twice on July 7 and July 13 due to 8% drops, driven by extreme volatility from Samsung Electronics and SK Hynix single-stock leveraged ETF products. These 16 leveraged and inverse products, combined with the two underlying stocks, accounted for nearly 50% of domestic market trading volume, amplifying price swings beyond levels seen during the financial crisis.
Investor Deposits and Margin Balances Decline in July
Investor deposits, representing standby capital that can be deployed into stocks at any time, dropped to 111.2825 trillion won on July 14, down from 105.5758 trillion won on July 10 — the lowest since February 20 when deposits stood at 104.1291 trillion won. The Korea Financial Investment Association data showed the decline signals weakening buying demand among retail investors. Margin trading balances, a measure of borrowed funds used for stock purchases, also fell to 34.7078 trillion won on July 14, the lowest level since April 21 when balances were 34.6946 trillion won. The simultaneous drop in both metrics indicates contracting investor sentiment in South Korean stocks.
KOSPI Circuit Breakers Triggered Twice in July
The KOSPI market experienced circuit breaker activations on July 7 and July 13, halting trading after the index fell 8% or more. Buy and sell sidecars, which temporarily pause program trading when index futures move sharply, were triggered seven times on KOSPI and five times on KOSDAQ during July. KB Securities analyst Lee Eun-taek stated that "credit and margin forced selling, foreign net selling, deposit declines, and ETF rebalancing are intricately intertwined," adding that "follow-up supply concerns remain and it is difficult to forecast future supply conditions." The volatility exceeded levels observed during the financial crisis, driven by concentrated trading in semiconductor stocks and related derivative products.
Samsung and SK Hynix Leveraged ETFs Amplify Market Volatility
Samsung Electronics and SK Hynix single-stock leveraged ETFs emerged as the primary driver of market volatility, with some leveraged products declining over 30% in a single day. Asset managers sold additional underlying assets to maintain target leverage ratios, creating a feedback loop where price declines triggered further selling. The combined trading volume of Samsung Electronics, SK Hynix, and 16 related leveraged and inverse products accounted for nearly 50% of total domestic market turnover. Goldman Sachs analyzed that "KOSPI's daily fluctuation range significantly exceeds typical standard deviation," attributing the amplified intraday volatility to "rapid deleveraging (forced selling) of Samsung Electronics and SK Hynix single-stock leveraged ETFs."
FAQ
What happened to South Korean stocks investor deposits in July?
Investor deposits fell to 111.2825 trillion won on July 14, with the lowest point on July 10 at 105.5758 trillion won — the weakest level since February 20 at 104.1291 trillion won, according to the Korea Financial Investment Association.
Why did KOSPI trigger circuit breakers in July?
KOSPI circuit breakers activated on July 7 and July 13 after the index fell 8% or more, driven by extreme volatility from Samsung Electronics and SK Hynix single-stock leveraged ETF deleveraging and concentrated trading that accounted for nearly 50% of market volume.
How did Samsung and SK Hynix leveraged ETFs affect market volatility?
Goldman Sachs stated that rapid deleveraging of Samsung Electronics and SK Hynix single-stock leveraged ETFs amplified KOSPI's intraday volatility, with some products declining over 30% in a single day and forcing asset managers to sell additional underlying assets to maintain leverage ratios.
