Value context and insight. lkm@koreatimes.co.kr
Institutional investors betting on bearish turn in stock market
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By Lee Kyung-min
By Lee Kyung-min
Institutional investors bought over 120 billion won ($106 million) in the leveraged inverse exchange-traded fund (ETF) that tracks the performance of the local benchmark KOSPI over the past two weeks, in anticipation of a bearish turn in the months-long bullish stock market, data showed Sunday.
The derivative financial product is designed to boost returns 2:1 compared to the KOSPI when the market is falling. For example, if the KOSPI dips by 2 percent, a two times-leveraged inverse ETF will deliver a 4 percent return to the investor excluding fees and commissions, without the investors having to conduct shortselling.
Data from Korea Exchange (KRX) showed institutional investors bought 120.2 billion won KODEX 200 Futures Inverse 2X from Feb. 22 through March 5, the third-largest amount of products bought by them following shares of POSCO (182.1 billion won) and Lotte Chemical (145 billion won).
This far exceeds the amount of major large-cap shares net bought by them including SK Hynix (115 billion won), Shinsegae (86.6 billion won), KT (74.3 billion won) and S-Oil (69.5 billion won).
Foreign investors also net bought 33.4 billion won worth of the derivative inverse product in the same period.
The products scooped up by the two large players that account for a respective 50 percent and 30 percent of the local stock market came from individual retail investors who sold a combined 152.5 billion won over the past two weeks.
Yet some argue that the large purchase volume is explained in part by a move to maintain the number of securities available in the market by liquidity providers (LP). They act as a middleman by buying a large number of securities issued by firms and make them available for individual retail investors to buy, regardless of investment positions.
Some investors expect a possible bearish turn given that the KOSPI has largely plateaued over the past two months, with the previous high of 3,266.23 points set on Jan. 11 yet to be broken.