Changes in Shopping Baskets After Omicron... Seohak Ants' "Leverage Betting"

Buy the Dip Amid US Stock Market Correction
Boost Profits with ETFs

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Minji Lee] Since the emergence of the Omicron variant virus, so-called ‘Seohak Ants’?investors in overseas stocks?have significantly increased their holdings of leveraged ETFs, boosting their returns. As the U.S. stock market, which had been hitting record highs, experienced a sharp correction due to Omicron, investors took advantage of this as a buying opportunity at the bottom.

According to the Korea Securities Depository on the 8th, from the 26th of last month, shortly after Omicron appeared, until the 7th of this month, overseas stock investors massively added leveraged ETPs (Exchange Traded Products, including ETFs and ETNs) to their portfolios. During this period, individuals purchased 168.6 billion KRW worth of the ‘ProShares UltraPro QQQ ETF,’ making it the second-largest purchase among all overseas stocks. This ETF tracks the Nasdaq 100 Index at three times leverage. As the Nasdaq 100 Index showed signs of hesitation following Omicron’s emergence, domestic overseas investors appeared to believe the index would revert to previous levels and thus heavily invested in leveraged products.

Additionally, domestic investors bet on the rise of the Philadelphia Semiconductor Index by net buying 58.7 billion KRW worth of the ‘Direxion Daily Semiconductor 3x ETF,’ seeking triple returns, making it the fifth most purchased product. Other purchases included 49.4 billion KRW in an ETF tracking the Nasdaq 100 Index at 1x leverage and 36.9 billion KRW in the ‘Direxion Daily Biotechnology 3x ETF,’ which seeks three times the return of the S&P Biotechnology Industry Index. Overseas investors also heavily bought leveraged ETN products, which promise contracted returns backed by securities firms’ credit. They purchased 35.6 billion KRW and 28.5 billion KRW worth of the ‘BMO MicroSectors FANG Innovation Companies 3x ETN,’ which includes 15 U.S. tech stocks such as Facebook, Amazon, Apple, Netflix, and Google (FANG), and the ‘BMO MicroSectors FANG+ 3x ETN,’ which invests in 10 global tech innovation companies including FANG, respectively.

As concerns over Omicron eased and U.S. stocks recovered to pre-variant levels, leveraged investors’ bets resulted in significant profits. After Omicron’s emergence, the Nasdaq 100 Index hit a low of 15,712.04 on the 3rd of this month but surged 3% in a single day to close at 16,325.66, suggesting an estimated gain of around 4%.

Securities experts analyzed that the rise in tech stocks is supported by optimistic sentiment, as Omicron is known to have a lower fatality rate than initially feared, and by a strengthened ‘buy the dip’ strategy?where investors increase their purchase size when prices fall?on large tech stocks that had recently dropped sharply. They also noted that the ‘FOMO syndrome’?fear of missing out if one does not act aggressively during market corrections?has influenced investor sentiment. However, investments focused on U.S. tech stocks remain sensitive to changes in the Federal Reserve’s monetary policy, warranting caution. Sangyoung Seo, a researcher at Mirae Asset Securities, advised, “Since the Fed’s hawkish stance has become a given, the likelihood of this upward trend continuing long-term is low.”

This content was produced with the assistance of AI translation services.