Tesla’s 40% Plunge Burns Koreans Who Plowed Into Leveraged ETFs

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Tesla’s 40% Plunge Burns Koreans Who Plowed Into Leveraged ETFs

(Bloomberg) — Tesla Inc.’s share price slump is taking a toll on risk-loving investors in South Korea, who have plowed into leveraged bets on the US carmaker.

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Korean investors were by far the biggest holders of the Leverage Shares 3x Tesla exchange-traded product listed in London, according to Feb. 21 data from three local brokerages compiled by Bloomberg News. The product, which seeks to provide three times the daily return of Tesla shares, has lost more than 80% from a December peak while the Elon Musk-run company’s shares have plunged 41%.

The losses Korean investors have taken on their leveraged Tesla bets is just the latest sign of a swashbuckling approach to stock markets that has sometimes unnerved regulators and brokers. Last week, local brokerage Mirae Asset Securities Co. said it will suspend orders for some of the riskiest leveraged ETPs listed overseas, warning against potential losses.

Another leveraged exchange-traded fund listed in the US seeking two times daily return on Tesla has had nearly 70% of its value wiped out from a peak on Dec. 17. Korean investors held $1.5 billion worth in the fund as of Wednesday, according to depository data, accounting for 43% of the fund’s total assets.

Read: Wall Street Gamblers Get Crushed as Leveraged ETF Losses Hit 40%

Leveraged ETPs have become popular globally, minted in bulk by Wall Street product managers in the post-US election bull euphoria. Yet as the Magnificent Seven stocks tumble on uncertainties introduced by US President Donald Trump’s tariff policies and the rise of ******** tech rivals, speculative products that have relied on an unstoppable surge in the US megacaps are buckling.

The punch will be felt heavily by Korean mom-and-pop investors, who account for an outsized chunk of trading volumes. They have long been known for their embrace of high risk and volatility as a way to accumulate wealth fast — weathering multiple bouts of heavy losses in bitcoin and China-related structured notes. Tesla has especially been popular since the pandemic.

Read: Musk’s Korean Fans Hope to Get Rich With $15 Billion Tesla Stake

Korean investors held around 358 billion won ($245 million) of the London-listed Leverage Shares 3x Tesla product as of Feb. 21, according to data from Mirae, NH Investment & Securities Co. and Samsung Securities Co. That represented more than 90% of the funds’ assets on that day, shows Bloomberg calculations.

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“Tesla has long been one of the most favored stocks among Korean investors, and this enthusiasm has naturally extended to leveraged Tesla products like TSL3,” said Bora Kim, APAC head of strategy at Leverage Shares, an ETP provider. The high volatility of the shares is part of the appeal to Korean investors, she said, adding that the products are designed for short-term trading.

(Update with more background from fifth paragraph.)

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