Key points
- Korea's new 30 million won ($21,100 USD) cash rule covers single-stock leverage products only. Index funds were left out of it.
- On July 31, the first day, individual investors net sold more than 1 trillion won ($702 million USD) of single-stock leverage ETFs, according to Herald Corp.
- The same day they net bought about 500 billion won ($351 million USD) of index inverse ETFs, which the rule does not touch.
- KODEX 200 Futures Inverse 2X alone took 371.5 billion won ($261 million USD), the largest individual net buy of any fund that day.
- The Kospi rose a record 17.91% that session, so the money moved into a bet against a market that was going straight up.
Korea spent two months arguing about single-stock leverage funds, and on July 31 the rule that was supposed to slow them down finally arrived. Anyone buying the 2x products on Samsung Electronics or SK Hynix now needs 30 million won ($21,100 USD) in cash. Trading in those funds fell 76% on the first day, which we wrote about over the weekend.
The money didn't leave. It moved one door down.
Herald Corp (헤럴드경제) put numbers on it the next morning, and they are the only published figures for these flows that I can find. On the same day, individual investors net sold more than 1 trillion won ($702 million USD) of single-stock leverage ETFs and net bought about 500 billion won ($351 million USD) of index inverse ETFs. KODEX 200 Futures Inverse 2X, which pays double the opposite of what the Kospi 200 does in a day, took 371.5 billion won ($261 million USD) of that on its own. It was the single largest individual net buy of any fund in Korea that day. KODEX Inverse was second at 111.1 billion won ($78 million USD).
Why the rule stops at one door
The Financial Services Commission (금융위원회) wrote the measure for single-stock leverage products, the ones built on Samsung and SK Hynix that launched on May 27 and that regulators blamed for making the whole index move harder than it should. Those are the products that now need 30 million won in cash, with shares and bonds no longer counting toward the deposit.
Index products weren't part of it. A fund built on the Kospi 200 rather than on one company sits outside the new requirement, so the 30 million won cash bar doesn't apply to it. An investor who wanted 2x exposure on Friday morning and couldn't clear that bar had somewhere else to go by the opening bell.
Korean investors have a nickname for the 2x inverse products. They call them 곱버스, a squashing together of the word for multiply and the word inverse.
What makes this uncomfortable
July 31 was the day the Kospi rose 17.91%, the largest single-day rise in its history. Samsung had its best day on record and SK Hynix closed limit up for the first time in about 17 years.
So the money that moved into index inverse funds moved into a bet that the market would fall, on the day it did the opposite harder than it ever has. That's not a detail. It's the same pattern we reported on Friday, when small investors were buying the funds that pay when SK Hynix drops, hours after it closed limit up.
Analysts reading the first day were careful about how much to credit the rule.
Han Ji-young, a researcher at Kiwoom Securities (키움증권), credits the price crash at least as much as the rule.
"With the assets under management in the related single-stock leverage ETFs having fallen because of the recent sharp drop in Samsung Electronics and SK Hynix share prices, and with the basic deposit increase implemented on top of that, there is a possibility that the leverage-driven volatility in supply and demand will also ease as time goes on," Han said.
The order in that sentence matters. The funds shrank first because the two stocks fell, and the rule landed afterward.
Kim Jae-seung, a researcher at Hyundai Motor Securities (현대차증권), describes what these funds had already done to the index.
"As the share of single-stock leverage ETFs in individuals' domestic equity ETF trading rose recently, the concentration inside the Kospi widened," Kim said. "After this measure, there is a possibility that rotation within the Kospi expands."
That's close to what the flow data already showed on day one. The trading didn't stop. It relocated.
What to watch this week
One session is a small sample, and July 31 wasn't a clean one, since US markets had risen sharply the night before and Seoul opened into a rally it hadn't created. The first honest read on whether the rule changed behavior or just changed the ticker people use is the week starting August 3.
Two things would settle it. If index inverse funds keep pulling several hundred billion won a day from individual investors, the deposit rule moved the risk instead of reducing it. If those flows fade too, then the money really is stepping back rather than stepping sideways.
Regulators have already said more measures are coming, including a look at cutting the 2x multiple itself. That one would reach every product carrying a multiple, whatever the multiple happens to be built on.
Sources
- 헤럴드경제, 단일종목 레버리지 '3000만원 규제'에 지수형 인버스 '북적'…개미들 5000억 '폭풍 매수' [투자360], on the July 31 flows into index inverse funds and the analyst remarks
- 금융위원회, 관계기관 합동 단일종목 레버리지 상품(ETF·ETN) 보완방안, on which products the deposit rule covers
- Our earlier coverage: the rule's first day and the investors betting against SK Hynix
Won figures are converted at 1,424 won to the dollar, the July 31, 2026 rate. Analyst remarks are translated from Korean. This article is for information only and is not investment advice.
