Goldman Sachs identified mechanical selling from single-stock leveraged ETFs as a key factor amplifying the KOSPI decline on the 14th day. The investment bank reported that some 2x leveraged ETFs based on semiconductor stocks like Samsung Electronics and SK Hynix fell over 30% in a single day, triggering forced asset sales by fund managers to maintain target leverage ratios, which created a feedback loop of declining prices driving further selling. Financial Supervisory Service Governor Lee Chan-jin met with representatives from 20 major asset management firms on the previous day and expressed concerns over systemic risks and overheated marketing of single-stock leveraged ETFs. Goldman Sachs estimated that 62% of domestic institutional net selling of $1.5 billion came from ETF-related liquidations, while foreign net selling of $1.13 billion was primarily from passive program trading. The analysis comes as Korean stocks face heightened volatility amid liquidity-driven position unwinding rather than structural deterioration in semiconductor industry fundamentals.
Single-Stock Leveraged ETFs Trigger $2.63 Billion Institutional Selling
Goldman Sachs stated in a report titled "KOSPI Tests Key Technical Support Levels" that rapid deleveraging of recently launched single-stock leveraged ETFs amplified intraday volatility. On the previous day, foreign investors and domestic institutions net sold $1.13 billion and $1.5 billion respectively on the securities market. The investment bank estimated that 62% of domestic institutional net selling originated from ETF-related liquidations. Foreign net selling was mostly from passive funds including program trading, with program selling reaching $1.18 billion. Block trades by institutional investors were limited relative to the index decline, with selective selling observed only from some trend-following hedge funds.
Financial Supervisory Service Governor Lee Chan-jin expressed concerns over systemic risks and overheated marketing of single-stock leveraged ETFs during the meeting with 20 major asset management firm representatives on the previous day. Goldman Sachs stated that future regulations are likely to focus on strengthening investor entry requirements rather than an outright ban on product launches.
Goldman Sachs Sets KOSPI Support Levels at 6,800, 6,500, and 6,100-6,000
Goldman Sachs designated the 6,800 level as the most important technical support line for the KOSPI. If the KOSPI fails to hold 6,800, the next support level is 6,500, approximately 4.5% below the previous day's close. If that level is breached, the index could fall further to the 6,100-6,000 range. The investment bank stated that considering the KOSPI's recent daily volatility significantly exceeds typical standard deviation, the 6,100-6,000 range could serve as a stronger support zone.
Goldman Sachs assessed that mechanical foreign selling, National Pension Service portfolio adjustments, and high swap financing costs remain near-term burden factors for the Korean stock market.
Goldman Maintains Memory Semiconductor Earnings Outlook Despite Stock Declines
Despite sharp declines in Samsung Electronics and SK Hynix stocks, earnings forecasts for the memory semiconductor sector have not been downgraded. Goldman Sachs diagnosed the recent correction as closer to liquidity-driven position liquidation rather than a structural peak in the semiconductor cycle. The investment bank judged that fundamental conditions for the semiconductor industry remain solid, as supply shortages may delay industry capacity expansion until the second half of 2028.
Goldman Sachs stated that investors need to selectively buy stocks with high investment conviction among memory semiconductors and technology stocks whose valuations have declined significantly, taking advantage of extreme volatility.
FAQ
What did Goldman Sachs identify as the key KOSPI support level on the 14th day?
Goldman Sachs designated 6,800 as the most important technical support level for the KOSPI. If that level fails to hold, the next support is 6,500, approximately 4.5% below the previous day's close, with a potential further decline to the 6,100-6,000 range if 6,500 is breached.
Why did single-stock leveraged ETFs amplify the KOSPI decline?
Some 2x leveraged ETFs based on Samsung Electronics and SK Hynix fell over 30% in a single day, forcing fund managers to sell additional underlying assets to maintain target leverage ratios. This created a feedback loop where price declines triggered further selling, amplifying intraday volatility.
What regulatory response did the Financial Supervisory Service signal for leveraged ETFs?
Financial Supervisory Service Governor Lee Chan-jin expressed concerns over systemic risks and overheated marketing of single-stock leveraged ETFs during a meeting with 20 major asset management firm representatives on the previous day. Goldman Sachs stated that future regulations are likely to focus on strengthening investor entry requirements rather than an outright product ban.
