Retail investors betting against Kosdaq rally see losses amid continued bull market

An electronic board shows the Kosdaq closing at 1,133.52 points at Hana Bank in Seoul, Wednesday. Yonhap

Retail investors who had bet on a sharp correction in the country’s Kosdaq market are suffering growing losses as the tech-heavy index broke above 1,000 points for the first time, market watchers said Wednesday.

This mirrors a recent retail investor misstep concerning the country's benchmark KOSPI. When the index exceeded the historic 5,000 level last week, some investors increased holdings of leveraged inverse products, expecting a bearish development. The benchmark, however, has since topped 5,100 points.

Inverse products are financial instruments designed to move in the opposite direction of a specific index or assets.

According to the Korea Exchange (KRX), retail investors net sold 159.8 billion won ($111 million) worth of leveraged Kosdaq exchange-traded funds (ETFs) from Jan. 1 to 22. They instead net bought 15 billion won of inverse ETFs over the same period.

Foreign and institutional investors made the opposite move. Over the same period, they net bought leveraged Kosdaq ETFs worth 3.3 billion won and 154.4 billion won, respectively.

They sold off inverse products worth 300 million won and 149 billion won, respectively.

On Monday, facing mounting losses, retail investors rushed to revise their portfolios.

In a single session, they net bought 296.9 billion won of Kosdaq leveraged ETFs, in a belated yet sharp shift.

Still, some added another 43 billion won to inverse products, highlighting lingering unease about the domestic market.

They are believed to have incurred significant losses.

All five major Kosdaq inverse ETFs fell by double digits in a single session, Monday.

Many inverse products logged an intraday loss of over 11 percent.

Market watchers say the recent rally’s drivers extend beyond short-term speculation.

Expectations for government support to advance the capital market under the Lee Jae Myung administration include ways to reinvigorate the Kosdaq market.

A special committee set up jointly by the administration and the ruling Democratic Party of Korea declared a plan to lift the Kosdaq to over 3,000 points.

The KOSPI ended at 5,170.81 points, Wednesday, up 1.69 percent from the previous session.

The Kosdaq ended at 1,133.52 points, up 4.7 percent from the previous session.