“Did They Bet Too Early?” Losses Snowball for ‘Geopverse Ants’ as KOSPI Soars to 7,000

This year, after a sharp rally in the domestic stock market, individual investors who anticipated a correction phase made large investments in 'Geopverse' (2x inverse) exchange-traded funds (ETFs), which bet double on a market downturn. However, as the KOSPI has continued to rise for several days, their losses have been snowballing.

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According to ETF Check on May 6, over the past month, individual investors made net purchases of 529.9 billion won in the 'KODEX 200 Futures Inverse 2X'. This ranks second among ETFs most heavily bought by individual investors. Additionally, 186.8 billion won of funds flowed into the 'KODEX Inverse', which bets single on a falling market, making it the twelfth most net-purchased ETF.

However, as the Korean stock market has continued to hit new highs, the returns on Geopverse ETFs have plummeted. The largest product, KODEX 200 Futures Inverse 2X, recorded a one-month return of -42.21%. In addition, all four KOSPI200 Geopverse ETFs listed in Korea saw their one-month returns fall into the -40% range. When looking at returns since the beginning of this year, losses have expanded to as much as -70%.

The share prices have now reached 'penny stock' levels. As of the close on May 4, KODEX 200 Futures Inverse 2X was priced at 152 won, TIGER 200 Futures Inverse 2X at 161 won, RISE 200 Futures Inverse 2X at 156 won, and KIWOOM 200 Futures Inverse 2X at 154 won. Even the highest-priced PLUS 200 Futures Inverse 2X is at 314 won, well below 1,000 won.

Due to poor returns, concerns about 'delisting' have also emerged. If an ETF's total net assets fall below 5 billion won after one year of listing and this situation is not resolved by the end of the following half-year, it becomes subject to delisting. Currently, KIWOOM 200 Futures Inverse 2X has total net assets of 2.3 billion won, PLUS 200 Futures Inverse 2X is at 1.8 billion won, and RISE 200 Futures Inverse 2X is at 4.5 billion won, all already below the 5 billion won threshold.

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In the case of exchange-traded notes (ETNs), delisting has already become a reality. On April 29, four Geopverse ETN products-'Samsung Inverse 2X KOSPI200 Futures ETN', 'Mirae Asset Inverse 2X KOSPI200 Futures ETN', 'KB Inverse 2X KOSPI200 Futures ETN', and 'Shinhan Inverse 2X KOSPI200 Futures ETN'-entered the liquidation process following their delisting. ETNs can be delisted and liquidated early if their real-time indicative value (IIV) falls below 1,000 won at the closing price.

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