The KOSPI and other indicators are displayed on a monitor at the Hana Bank dealing room in Jung-gu, Seoul on the 26th. On this day, the KOSPI started at 8,070.91, up 223.20 points (2.84%) from the previous trading day, and the KOSDAQ index started at 1,189.28, up 28.15 points (2.42%). [Photo=Yonhap News]

The KOSPI surpassed the 8,100 mark during intraday trading, re-entering its record high range.

Foreign investors turned to net purchases for the first time in 13 trading days, with Samsung Electronics and SK Hynix at the center of their buying.

However, the listing of single-stock leveraged products could turn the semiconductor concentration into a new source of volatility.

The KOSPI broke through the 8,100 level during trading on the 26th. Foreign investors shifted to net purchases for the first time in 13 trading days, led by Samsung Electronics and SK Hynix.

As of 11:10 AM on this day, Samsung Electronics and SK Hynix were the top net purchase stocks by foreign investors. Foreigners were recorded to have net-purchased 452.8 billion won worth of Samsung Electronics and 320.9 billion won worth of SK Hynix.

These two stocks were also the most sold by foreign investors during the preceding 12 consecutive trading days of net selling. As foreign selling halted and turned back to buying, the KOSPI surged to the 8,100 mark in one go.

There is one question for this report.

“Is the return of foreign investors a sign of recovery in the Korean stock market's resilience, or the starting point of overheating driven by large-cap semiconductor stocks and leveraged products?”

The shift to net purchases by foreign investors is undoubtedly a positive signal. In the Korean stock market, foreign capital is a key variable determining the direction of the index. In particular, Samsung Electronics and SK Hynix have a significant impact on the KOSPI's market capitalization and investment sentiment.

The fact that foreign investors have begun buying these two stocks again indicates a change in the short-term outlook for the semiconductor industry and the Korean stock market.

However, this rally is closer to a concentrated surge driven by large-cap semiconductor stocks rather than a broad-based recovery of the entire market. The more foreign capital is concentrated in Samsung Electronics and SK Hynix, the more strongly the KOSPI becomes tied to the stock price movements of these two companies.

When semiconductors rise, the index climbs rapidly, but conversely, if profit-taking occurs, the entire index could become unstable. The return of foreign investors is a driving force for the rally, but if that force is concentrated in specific stocks, the concentration, rather than the market's resilience, should be observed first.

Adding to this is the new variable of single-stock leveraged products.

The Korea Exchange announced that it would list 18 types of leveraged and inverse products investing in Samsung Electronics and SK Hynix on the Korea Securities Exchange on the 27th.

The total listing size is expected to exceed 4 trillion won. Eight asset management companies are launching leveraged and inverse ETFs, with a total of 16 ETFs and 2 ETNs entering the market.

Single-stock leveraged products differ from typical diversified ETFs. They are structured to track the daily return of a single stock, such as Samsung Electronics or SK Hynix, with a leverage of 2x. While profits can be amplified when the stock price rises, losses are also doubled when it falls.

The Financial Services Commission recommended that only experienced investors who clearly understand the product structure and risks should approach these products for short-term investment, as single-stock leveraged ETFs and ETNs have a higher potential for loss than general products.

There are two risks.

The first is the risk of investor loss.

The Financial Services Commission explained that if leveraged products move against investors' expectations, significant losses can occur in a short period. Furthermore, even if the price of the underlying asset fluctuates, a negative compounding effect can reduce the invested capital.

In particular, the Financial Services Commission provided an example where a 20% drop followed by a 20% rise results in a 4% loss for general products, but a 16% loss for a 2x leveraged product.

The second is the risk of market volatility.

Single-stock leveraged products involve rebalancing and hedging transactions to track the daily returns of their underlying assets. As trading volume increases, mechanical trading can occur not only in intraday supply and demand but also in the closing auction.

While this can act as additional buying pressure during uptrends, it can amplify selling pressure during downtrends.

Considering the weighting of Samsung Electronics and SK Hynix in the KOSPI, the supply and demand for these products can lead to index volatility beyond individual stocks.

Individual investor interest is already high.

According to the Financial Supervisory Service, approximately 100,000 investors applied for advanced training related to single-stock leveraged products from April 28 to May 21. New investors must complete this advanced training and deposit a basic pre-deposit of 10 million won to trade.

The fact that investor waiting demand has rapidly increased, despite institutional entry barriers, suggests that leveraged products are likely to absorb short-term trading demand from the moment they are listed.

Therefore, it is insufficient to interpret the KOSPI's breakthrough of 8,100 as merely a new record high.

The return of foreign investors is the main driving force behind the index's rise. However, if that force is concentrated in Samsung Electronics and SK Hynix, and single-stock leveraged products are combined, the speed of the rally may increase, but the amplitude of corrections could also widen.

What needs to be confirmed now is not the number of the index.

First, we need to see if foreign net purchases are a one-day return or if they will continue as sustained buying.

Second, we need to check if the rally centered on Samsung Electronics and SK Hynix is spreading to other sectors such as automobiles, shipbuilding, finance, bio, and internet.

Third, we need to observe whether individual funds are entering with a long-term investment perspective after the listing of single-stock leveraged products, or if they are engaging in short-term speculative churn trading.

The conclusion of this market phase is clear.

The return of foreign investors is a sign of recovery in the Korean stock market, but leveraged overheating is a risk factor that could turn that recovery into volatility.

The KOSPI 8,100 mark is a new price level. However, a new price level does not necessarily mean a stable zone. The market has risen, but its structure has become more sensitive.

※ This report is a market structure analysis to aid in understanding the article, not investment advice. Actual market and stock prices may vary depending on foreign investor flows, exchange rates, interest rates, semiconductor industry conditions, derivatives flows, investor sentiment, etc. In particular, leveraged and inverse products can lead to rapid losses, so it is essential to fully understand the product structure and risks.