South Korean day traders are significantly reducing their involvement in leveraged exchange-traded funds (ETFs) that track major chipmakers like Samsung Electronics Co. and SK Hynix Inc. The trading value of these risky products, designed to deliver twice the daily returns of the underlying chipmakers, has collapsed to just 4% of its peak level recorded in June. This marks a substantial decline in investor fervor for these high-risk financial instruments.
This shift is largely attributed to a new, mandatory mock trading course implemented by South Korean authorities. This onerous course appears to be an effective measure aimed at cooling speculative trading and reducing the extreme volatility seen in the country's $4.3 trillion stock market. The impact of this regulatory change is evident as these leveraged chip ETFs are now poised to experience their first monthly outflow of funds.
The broader context includes several other significant financial and geopolitical developments. US President Donald Trump announced a substantial oil deal with Venezuela, which aims to access the country's vast oil reserves. Venezuelan officials, including Delcy Rodríguez, stated the 25-year bilateral project targets over 1.5 million barrels per day initially and could generate approximately $209 billion in revenue for Venezuela based on a $65 per barrel benchmark price, with Venezuela retaining ownership and sovereignty over its resources while receiving about $19 per barrel. However, experts caution that Venezuela's dilapidated infrastructure will require significant investment and time to substantially boost production, and some Venezuelans view the deal as a betrayal.
Separately, European central bankers have expressed concerns over recent US policy shifts, particularly the US Treasury's interventions in the currency market, including selling euros to prop up the Japanese yen, and plans to increase buybacks of longer-dated bonds. These actions, especially the lack of prior consultation regarding euro sales, have raised alarms among European officials about potential unilateral US actions and their impact on global financial stability. Additionally, former Federal Reserve official Kevin Warsh has adopted a hawkish stance on interest rates, leading markets to price in a higher probability of a rate increase at the upcoming Federal Open Market Committee meeting on September 16, setting up a potential clash with President Trump.
