South Korean investors drive high U.S. ETF trading volumes

South Korean retail investors are showing significant activity in the U.S. ETF market, characterized by heavy involvement in leveraged products and a recent shift toward risk management.

Data from the Korea Securities Depository indicates that South Korean investors hold over 27% of the total market capitalization of the Direxion Daily Semiconductor Bull 3X Shares (SOXL), amounting to approximately $5.24 billion. The trading volume for SOXL by domestic investors has also been substantial, recently surpassing the combined trading volume of the top 20 other overseas stocks.

However, recent trends suggest a move toward volatility management. Between August 28 and September 3, South Korean investors heavily purchased the iShares 0-3 Month Treasury Bond ETF (SGOV), with net purchases totaling $92.96 million. This shift toward ultra-short-term U.S. Treasuries coincides with a massive sell-off in leveraged semiconductor products, including a net sale of $1.1 billion in SOXL during the same period.

In response to high trading concentrations, the U.S. alternative trading system Blue Ocean suspended daytime price quotes for certain tickers, including SOXL and KORU, to comply with U.S. Securities and Exchange Commission (SEC) fair access regulations.