Funds Shift Away from Restricted Leveraged ETFs, Korea's KOSDAQ Rebounds Over 30% from Lows
Alina Collins
Korea's KOSDAQ has bounced more than 30% from its July 30 low, fueled by retail money forced out of leveraged single-stock ETFs — the resulting rotation produced the strongest weekly outperformance versus the KOSPI since the 2000 dot-com bubble.
Why did KOSDAQ spike so hard?
KOSDAQ rose as much as 6.8% intraday on Monday; the Korea Exchange triggered its sidecar — a programmatic buy-halt — three times in a single session.
The immediate catalyst: KOSDAQ futures surged, dragging the cash market higher.
This means → buying was concentrated enough to trip circuit breakers — this was not a gradual drift up but a rush of capital.
Where is the money coming from?
Regulators imposed tighter rules on single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix, requiring investors to post higher cash margins.
In plain terms = retail traders used to bet on big-cap tech with small deposits and borrowed money; regulators just raised the entry cost, pricing many of them out.
The result: trading volumes in those ETF products collapsed, and some of that money rotated into KOSDAQ small caps. Shinhan Securities analyst Park Wooyeol noted that "volatility-seeking retail investors are expected to return to the KOSDAQ."
How extreme is the outperformance?
KOSDAQ gained 11% last week while the KOSPI fell 5.1% — the single-week relative outperformance is the strongest since the 2000 dot-com era.
Month-to-date, KOSDAQ has beaten KOSPI by more than 20 percentage points.
This reflects not a broad market improvement but a violent reallocation of capital from large caps to small caps.
Why was KOSDAQ so beaten down in the first place?
A sharp reversal in global AI sentiment triggered a historic sell-off; the KOSPI fell nearly 40% from its June peak to its July trough.
Forced liquidations — brokers selling out over-leveraged margin positions — accelerated the deleveraging, and KOSDAQ bore the brunt.
This means → the rally's starting point was itself a panic-driven extreme low; the percentage gain looks dramatic, but prices remain far below prior highs.
Can the rally last?
The key variable is simple: whether retail money keeps flowing into KOSDAQ or finds its next speculative outlet elsewhere.
Regulators continue to restrict leveraged-ETF access → money stays in small caps for now, but if curbs ease, capital may migrate again.
In plain terms = the fuel for this rally is "blocked money looking for a new home," not a fundamental re-rating — how long it burns depends on how tightly regulators keep the door shut.
Content is for reference only, not financial advice.