South Korean investors leverage Hong Kong to cash in on the AI and chips boom

FOMO (the fear of missing out) is causing some South Korean retail investors to turn to Hong Kong-based platforms to leverage their investments and cash in on the boom in semiconductors and AI.

Analysts attributed the diversion to Hong Kong from the world’s 14th largest economy to leveraged products issued by some of the city’s financial institutions, its currency advantages, easier access and regulatory arbitrage. However, the number of South Korean investors using Hong Kong-based platforms remains relatively small.

Two chip exchange-traded funds (ETFs) managed by Hong Kong-based CSOP Asset Management Limited, which track blue-chip semiconductor stocks Samsung Electronics and SK Hynix, have attracted substantial retail demand in South Korea as investors look to increase their leverage in an upcycle market amid the global AI surge.

When the 2X products – which deliver double the daily performance of an underlying index or stock – were launched in May and October last year, South Koreans were still unable to access such leveraged products at home.

The two ETFs have a combined size of over US$14 billion. South Korean retail investors, despite accounting for a relatively small proportion of traders, have been among the most active participants driving daily trading volume, said CSOP, Hong Kong’s largest ETF trader.

The top two items bought by South Korean investors in the first five months of the year were leveraged products tracking SK Hynix and Samsung Electronics, with cumulative purchases of US$311.8 million and US$211.1 million respectively, according to data released by SEIBro, a portal operated by the Korea Securities Depository.