Executives at overseas leveraged exchange-traded fund brands are visiting South Korea one after another. The trips reflect efforts to gauge investment demand and explore opportunities for new products as Korean investors emerge as key customers for U.S. leveraged instruments.
Seven of the top 20 overseas stocks by Korean investors' buy-and-sell settlement value over the past six months were leveraged or inverse ETFs, according to Seibro, the securities information portal of the Korea Securities Depository, as of the 22nd of this month. Widening the scope to the 17 ETFs among the top 50 stocks, 10 were leveraged or inverse products.
The most actively traded product was the Direxion Daily Semiconductor Bull 3X Shares (SOXL), which tracks three times the daily return of a U.S. semiconductor index. Its buy-and-sell settlement value over the past six months reached $56.4 billion (about 76.4 trillion won), more than six times that of Micron ($9.2 billion), the top individual stock by settlement value. SOXL also ranked first among leveraged ETFs by holdings value at $5.93 billion as of the 21st of this month. The ProShares UltraPro QQQ (TQQQ) followed at $5.04 billion.
As Korean trading has grown, visits by figures from the overseas ETF industry have continued. Matt Markiewicz, head of product and capital markets at Tradr ETFs, a U.S. leveraged ETF brand, said in an interview with The Seoul Economic Daily on the 17th of this month that "if Samsung Electronics or another Korean company lists shares in the U.S., we will actively consider launching a leveraged ETF using that stock as the underlying asset."
Tradr ETFs is the leveraged and inverse ETF brand of U.S. asset manager AXS Investments. Its total net assets stood at about $5 billion (about 6.88 trillion won) as of the 16th of this month. Of that, holdings by Korean investors amounted to $438.3 million (about 603.1 billion won), or about 9% of the total. Markiewicz cited the 2x Long SanDisk (SNXX), 2x Long NuScale (SMU) and 2x Long Lumentum (LITX) as products popular with Korean investors.
Earlier, on the 8th of this month, Matthew Tuttle, chief executive of U.S. ETF manager Tuttle Capital Management, held a press briefing in Seoul. Tuttle said Korean investors account for 25% of assets in the T-Rex ETF leveraged products he co-manages with ETF issuer REX Financial.
The stream of visits continues at the end of this month. REX Financial's chief operating officer and an official in charge of ETFs and exchange-traded notes at BMO Capital Markets will host a dinner in Seoul on the 28th in the format of a press briefing. Since 2018, the two firms have offered leveraged and inverse ETNs of up to three times through the MicroSectors brand.
