Korean retail investors suffer significant losses in leveraged ETPs, with unrealized losses accounting for over 60%

(1) According to Korean media reports, taking into account both realized and unrealized losses, Korean retail investors have suffered a total loss of approximately 6.3 trillion KRW from leveraged equity exchange-traded products. (2) Data submitted by the Financial Supervisory Service of Korea to opposition party lawmakers shows that, from May 27 to August 14, retail investors at 10 Korean brokerage firms incurred these losses in the aforementioned products, with the statistics covering both realized profits and losses as well as current unrealized losses. (3) Of this, realized losses were about 2.3 trillion KRW, while unrealized floating losses amounted to approximately 4 trillion KRW, with unrealized losses accounting for around 63% of the total losses. (4) By age group, investors in their 40s experienced the largest losses, with about 165,000 accounts recording a combined floating loss of approximately 2.1 trillion KRW; investors in their 50s had about 158,000 accounts with a total loss of about 1.9 trillion KRW; investors in their 30s had approximately 117,000 accounts with a total loss of about 1.1 trillion KRW. (5) In terms of average loss per account, older investors suffered higher losses, with those aged 70 and above averaging a loss of about 30 million KRW per account. (6) The above data were collected from ETF and ETN trading results from 10 comprehensive financial investment companies, including Mirae Asset, Kiwoom, Samsung, NH Investment, Korea Investment, KB, Shinhan Investment, Meritz, Hana, and Daishin Securities. (7) Leveraged products amplify both gains and losses, so attention should be paid to how Korean regulators manage suitability for retail investors in derivatives trading as well as shifts in market sentiment going forward.