Kospi reclaims 6,800 as retail investors pile into leveraged ETFs

The Kospi rose more than 2% in early trade Friday, reclaiming the 6,800 level as investor sentiment improved following a Wall Street rebound and declines in US Treasury yields and global oil prices. Retail investors, who had watched the index retreat from the 7,000 mark to around 6,700, moved aggressively into leveraged exchange-traded funds in a bet on a recovery in the broader index and semiconductor shares.

As of 10 a.m., the Kospi stood at 6,853.85, up 138.44 points, or 2.06%, from the previous session. The index had opened at 6,885.70, a gain of 170.29 points, or 2.54%. On the main Kospi market, foreign and institutional investors were net buyers of 80 billion won ($58 million) and 289.3 billion won, respectively, supporting the advance. Other corporations also posted net purchases of 192.3 billion won, while retail investors were net sellers of 561.8 billion won.

Overnight on Wall Street, all three major indexes rebounded, shaking off the shock of the Federal Reserve's benchmark interest rate hike. The Dow Jones Industrial Average rose 0.61%, while the S&P 500 and Nasdaq gained 1.14% and 1.69%, respectively.

The positive cues from Wall Street lifted domestic semiconductor stocks. Samsung Electronics and SK hynix rose roughly 4% and 2%, respectively, leading the index higher. The Kosdaq was up 6.58 points, or 0.80%, at 828.76 at the same time.

Retail investors had been positioning for a rebound in the index and semiconductor shares since the Kospi pulled back from 7,000. According to Koscom ETF Check, individuals net-bought 256.7 billion won worth of KODEX Leverage in the week of Sept. 10–17, making it the top retail net-purchase among all domestically listed ETFs. KODEX Kosdaq150 Leverage also attracted net inflows of 83.4 billion won.

Leveraged semiconductor products also ranked among the top retail net-buy names. Individuals purchased 68.7 billion won of KODEX Semiconductor Leverage, while KODEX SK hynix Single-Stock Leverage (66.4 billion won), TIGER SK hynix Single-Stock Leverage (44.8 billion won) and TIGER Semiconductor TOP10 Leverage (44.5 billion won) also drew strong inflows.

Retail investors turned net buyers after the Kospi peaked at 7,000 and began to slide. They had been net sellers of more than 15 trillion won on the Kospi market from the start of this month through Sept. 9, but switched to net purchases of 6.97 trillion won over the following week. Samsung Electronics and SK hynix accounted for 1.61 trillion won and 1.32 trillion won of those purchases, respectively, as retail investors concentrated their buying in large-cap semiconductor names.

As the index retreated from the 7,000 level, retail investors appear to have simultaneously accumulated both physical shares and leveraged ETFs in anticipation of a rebound.

The Kospi had reclaimed the 7,000 mark on a closing basis on Sept. 9 for the first time in 33 trading sessions before turning lower. It slipped below 6,900 on Sept. 11 and was pushed down to around 6,700 on Thursday, as rising oil prices and interest rates ahead of the September FOMC meeting heightened market caution.

Analysts say the conclusion of major central bank policy events has cleared much of the macroeconomic uncertainty, with sector rotation — rather than a clear directional trend — seen as the more likely market dynamic going forward.

"Starting with the Fed's rate decision, this week's monetary policy meetings at major central banks including the Bank of Japan and the Bank of England are wrapping up, helping the market get past a key hurdle of macro uncertainty tied to rate decisions," said Lee Jun-hyung, a researcher at Eugene Investment & Securities. "US long-term bond yields have stabilized since the FOMC meeting, providing support for the index's downside, but the market remains in a trendless, directionless phase."

Han Ji-young, a researcher at Kiwoom Securities, said the September FOMC marked a turning point at which macro uncertainty began to peak out. "It is worth noting that market sensitivity to the high-rate environment — including the US 10-year yield breaking above 5.0% — appears to be fading," she said.

Analysts also advised paying close attention to sector differentiation. "The Kospi is moving sideways, but what we are seeing is sector rotation rather than a risk-off shift," said Kang Jin-hyeok, a researcher at Shinhan Securities. "Sector selection is critical during a period when prolonged high oil prices keep multiple compression in the driver's seat."