South Korean retail investors are piling back into contracts-for-difference, a leveraged product that triggered a market rout in 2023. Holdings in CFDs have jumped almost two-thirds over the past year to around 3.3 trillion won, or $2.2 billion, as of Monday, according to the Korea Financial Investment Association. The instruments allow investors to gain full market exposure by putting up just 40% of a position’s value, but their revival comes as leveraged exchange-traded products tied to chipmakers have already intensified volatility, prompting authorities to halt new listings of single-stock leveraged ETFs. Analysts warn that forced liquidations from CFD margin calls can amplify price swings in a lumpy and violent manner, recalling the 2023 selloff that sank several Korean gas stocks and the 2021 Archegos Capital blowup. Buy positions on Kospi index CFDs are near a peak, while holdings of SK Hynix CFDs surged almost 2,500% to 235 billion won and Samsung Electronics CFDs jumped fivefold to 217 billion won over the past year.
SK Hynix IncSurge in CFD holdings for SK Hynix indicates high retail speculation, which could amplify volatility but direction unclear.
Samsung Electronics Co LtdSurge in CFD holdings for Samsung Electronics indicates high retail speculation, which could amplify volatility but direction unclear.