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Korea Kosdaq jumps on leveraged ETF restrictions and ETF-driven rotation

The Kosdaq index rose as much as 6.8% on Monday and is set to outperform the Kospi by more than 20 percentage points this month.

Reported · Written up by our desk · Asia

South Korea’s small-cap Kosdaq is rebounding sharply as a rotation away from leveraged exchange-traded funds linked to major chipmakers shifts demand toward Kosdaq names. LiveMint Markets said the Kosdaq jumped as much as 6.8% on Monday, lifting gains from its July 30 low to more than 30%, while the Kospi has lagged this month.

The report attributes the move to restrictions on leveraged ETFs that track heavyweight stocks such as Samsung Electronics and SK Hynix, which have tightened retail access. LiveMint Markets added that trading activity in single-stock leveraged ETFs tied to chipmakers fell after regulatory curbs raised the required cash deposit, and that the Kosdaq is tracking a path to outperform the Kospi this month by more than 20 percentage points.

LiveMint Markets also noted that Korea Exchange interventions have become more frequent, with program buying briefly halted as Kosdaq futures surged, the third such step this month. Shinhan Securities analyst Park Wooyeol said money flow to Kosdaq has increased, forecasting that retail investors shifting into single-stock leveraged ETFs could return.

The rally comes after a historic selloff tied to global AI jitters that pulled the benchmark Kospi down nearly 40% from its June peak to a late-July low. LiveMint Markets said forced liquidations during that period helped unwind margin loans and that recent relative strength has been pronounced, with the Kosdaq up 11% last week while the Kospi fell 5.1%.

Latest closeKospi 6,300.10 ▼4.5%

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