Leveraged investors’ losses are growing due to the recent plunge in the Nasdaq. [사진 출처 = 연합뉴스]As the US stock market suffered a sharp correction at the beginning of the year due to concerns about austerity measures and interest rate hikes, as well as the possibility of a war between Russia and Ukraine, the losses of Seohak ants investing in leveraged products are increasing like a snowball. In order to invest in domestic leveraged products, prior training is required, but there is no such restriction in investing in overseas leveraged products. In Korea, only some 2x leveraged products are allowed, but in the US it is possible to invest up to 3x and in the UK up to 5x leveraged products. There are voices from all over the world calling for limiting excessive overseas leveraged investment by taking advantage of regulatory gaps.
According to the Korea Securities Depository on the 23rd, the amount of net purchases of 3-fold leveraged products listed on the US stock market in the three weeks this year reached 900 billion won. Of the total net purchases of the top 50 stocks, 3x leveraged products account for 30% of the total, showing an overheating pattern. This year, the Nasdaq has been declining except for 5 out of 14 trading days, but it is evaluated that the blind trust of the western ants in investing in large US technology stocks (big tech) is leading to excessive leveraged investments.
The stock that Seohak Ant bought the most at the beginning of the year was ‘ProShares Ultra Pro QQQ (TQQQ)’, which tracks the Nasdaq triple return. TQQQ is a product that Seohak Ants have invested in a lot among US exchange-traded funds (ETFs), but it is unusual for it to continue to rank first in net buying at the beginning of the year among foreign stocks, ETFs, and symbolic index securities (ETNs). It seems that the three-fold leveraged ETF split purchase method, which is popular in YouTube and Internet communities, has influenced the blind faith in Big Tech’s stock price rise.
‘Direction Daily Semiconductor Bull 3x (SOXL)’, which tracks the US semiconductor index’s return of 3x, is ranked fourth in Seohak Ant’s net buying. ‘Microsector Fang & Innovation 3x Leverage (BULZ)’, classified as ETN, ranked 10th in net buying of Seohak Ant.
The problem is that, unlike last year, the three-fold ETF and ETN yields are plummeting this year. TQQQ, where the net buying of Seohak ants is concentrated, posted a return of close to 100% last year, but this year’s return has fallen to -33.77% since the beginning of the year. The SOXL yield is even worse at -39.38% due to sluggish semiconductor stocks. The BULZ yield also fell to -42.14%, which was extremely sluggish. The yield of ‘Direction Daily S&P Biotech Bull Triple (LABU)’, a triple ETF that invests mainly in biotech companies, fell to -54.52% at the beginning of the year.
There is another bigger problem. In the US market, only 2x and 3x leveraged ETFs and ETNs can be invested, so some Seohak ants are turning their eyes to the London Exchange, where 5x products are available. Last month, on the London Exchange, products tracking the returns of three times the returns of individual big tech stocks such as Tesla and Apple, and products that track the returns of five times the returns of representative US indices such as the Nasdaq and S&P 500 were launched.
Among 5x leveraged products, Tesla 3x and Nasdaq 5x are attracting investors’ attention. In some Internet communities, articles sharing information on investment in products worth 5 times are also being posted.
There are only a handful of securities companies that can trade 5x leveraged products (5QQQ, 5SPY), such as Mirae Asset Securities and NH Investment & Securities. When a 5-fold product was listed in London last month, trading took place naturally in Korea.
Losses for 5QQQ and 5SPY investors are also snowballing as the Nasdaq 100 and S&P 500 are corrected. Since the beginning of the year, the return on the pound-based 5QQQ tradable on Mirae Asset has fallen to -38.99%. The 5SPY yield also fell into a swamp of sluggishness at -28.59%.
Experts urged caution in investing, saying that leveraged investment only works in a bull market and only increases losses in a correction market and sideways guarantee. Leveraged products have a futures rollover cost, which is rather disadvantageous for long-term investments. Choi Chang-gyu, head of Samsung Asset Management, said, “If the Nasdaq decline continues a little longer, Seohak Ants’ TQQQ investment will be cut in half.”
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