As Secondary Battery Stocks Waver, Retail Investors Bet on 'KOSDAQ Inverse ETF'

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This year, as the secondary battery stocks that led the sharp rise in the KOSDAQ index showed signs of overheating and reaching a peak, individual investors experiencing FOMO (Fear Of Missing Out) have been betting on KOSDAQ inverse ETFs. FOMO is a psychological term describing the fear of being left behind or excluded, which gained attention during the 2020-2021 COVID-19 pandemic liquidity boom when prices of stocks and cryptocurrencies surged, and those who missed out felt this emotion. It is interpreted that individual investors who failed to ride the surge of secondary battery stocks reacted by flocking to KOSDAQ inverse ETFs that bet on the decline of the KOSDAQ.

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According to the Korea Exchange on the 27th, the KOSDAQ index started at 679.29 on January 2 and closed at 830.44 the previous day. During this period, the KOSDAQ index recorded a rise of 22.25%. The KOSDAQ touched an intraday high of 913.97 on the 19th and then continuously declined. The rise rate until the 19th, when the KOSDAQ hit a new high, was 33.85%. However, as the secondary battery stocks that led the KOSDAQ rally showed peak signals and the recent selling incident triggered by SG Securities continued to have an impact, the KOSDAQ index fell by 8.64% over the past week (April 19 to April 26).

In the week following the KOSDAQ's record high on the 19th, the top five ETFs by returns were all KOSDAQ inverse ETF products betting on the KOSDAQ's decline. The highest return during this period was the 'ARIRANG KOSDAQ 150 Futures Inverse,' which rose 9.79%. Following that was the 'KBSTAR KOSDAQ 150 Futures Inverse,' which recorded a 9.72% increase. Additionally, ETFs ranked 3rd to 5th in returns were also inverse ETFs betting on the KOSDAQ's decline, with average returns in the 9% range.

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Although most of the top net-purchased stocks by individual investors this year were secondary battery stocks, those who failed to join the trend are believed to have flocked to inverse ETFs. From the 12th to the 26th, just before the KOSPI and KOSDAQ indices turned downward, funds flowing into five KOSDAQ 150 Futures Inverse ETFs totaled approximately 3.0525 trillion won.

Experts say it will be difficult for the stock market to rebound in the near term, and since predicting index movements is challenging, they recommend a conservative approach. The financial authorities announced investigations into 'debt-financed investments' centered on secondary batteries, which dampened investment sentiment toward secondary batteries. With the U.S. Federal Open Market Committee (FOMC) meeting in May approaching, the index is expected to enter a correction phase. Hwang Junho, a researcher at Sangsangin Securities, diagnosed, “Secondary battery stocks, which had driven the domestic stock market, have recently seen investment sentiment shrink as authorities announced investigations, and currently, there is no visible catalyst for the market to improve.” Kim Yonggu, a researcher at Samsung Securities, also advised, “Psychological factors like FOMO have tended to fuel the increase in debt-financed investments in the KOSDAQ. Because of this, a vicious cycle where selling triggers more selling can occur, so it is important to invest based on fundamentals.”

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