Chip rout puts Korea's 'ant' investors to the test as margin debt soars

By Cynthia Kim and Yena Park

SEOUL, June 8 (Reuters) - Seoul nonmigratory Laura Byun has agelong preferred U.S. communal funds implicit Korean shares, but the KOSPI's blistering rally changed that and her hazard tolerance for debt.

Feeling near retired by the surge that has propelled the Korean benchmark to the world's champion performer, ‌Byun tapped a short-term slope overdraft of astir 15 cardinal won ($9,687) to bargain a leveraged Samsung Electronics fund, delivering gains of astir 20%.

Then came the reversal. ‌By Monday morning, her presumption had swung to -17%, she said, aft the KOSPI plunged by implicit 8% successful the aftermath of a tech selloff successful U.S. markets.

The leveraged ETF tied to the spot elephantine tumbled arsenic increasing bets ​on a Federal Reserve complaint hike snapped Wall Street's nine-week winning run, wiping retired her gains and dragging her into losses.

"I'm not gonna bash anything. I don't know, I'm gonna hold for a rebound, unless similar it halves oregon something," Byun said.

Her acquisition captures a increasing hazard successful South Korea's markets, exposing however borrowed bets by a swelling question of retail investors, known arsenic "ants", are chasing a runaway banal rally and rattling policymakers wary of sharper volatility and a achy correction.

A Bank of Korea (BOK) study connected Thursday showed leveraged concern into equities by retail investors topped ‌a grounds 60 trillion won ($39.06 billion) arsenic of the extremity of ⁠May, arsenic the KOSPI much than doubled successful conscionable six months to go the world's apical performer.

Powering portion of that indebtedness propulsion was the May 27 instauration of South Korea's first-ever single-stock leveraged ETFs linked to chipmakers Samsung Electronics and SK Hynix - whose profits person soared with the ⁠AI roar - that offered investors treble the regular instrumentality of the stocks.

Demand was truthful beardown that the Korea Financial Investment Association's (KOFIA) website crashed connected the archetypal time retail investors were required to implicit mandatory grooming to commercialized the products, according to applicants specified arsenic Byun. More than 350,000 radical person since completed the course, KOFIA said.

FOMO STOKES LEVERAGE RISKS

But leverage cuts some ways. The ETFs treble losses arsenic ​well ​as gains, wrong South Korea's headdress of doubly a stock's regular determination - a diagnostic regulators accidental galore ​latecomers whitethorn underestimate.

"Investors should beryllium cautious of amplified marketplace volatility during imaginable ‌downturns, peculiarly if precocious comers to the marketplace progressively trust connected leverage to pursuit banal surges retired of FOMO (Fear Of Missing Out)," the BOK said, adding that the borderline loans are concentrated connected spot shares.