South Korean Investors Weather Tesla Turmoil Facing Heavy Losses in High-Stakes Bets

Recent turbulence in Tesla's share price has resonated significantly among South Korean retail investors, famed for their appetite for high-risk investments. This cohort of investors, having leveraged their exposure to Tesla through products like the Leverage Shares 3x Tesla ETP, has faced severe financial repercussions as the stock price plummeted.

According to data available up to February 21, South Korean investors own approximately 3580 billion won (equivalent to $2.45 billion) of the Leverage Shares 3x Tesla ETP listed in London. This makes them the largest holders of this leveraged product, which has seen its value dive over 80% since its peak in December of the previous year. During the same timespan, Tesla's stock itself has fallen by around 44% from its all-time high.

The effects of Tesla's price volatility have prompted reactions from financial firms and regulators alike. Last week witnessed Mirae Asset Securities Co., a prominent South Korean brokerage firm, taking measures to suspend some of the riskiest overseas-listed leveraged ETP transactions, to caution investors against potential losses.

Interest among South Korean investors in products offering amplified returns on Tesla has extended to another leveraged product, the Direxion Daily TSLA Bull 2X Shares ETF in the U.S., which has similarly suffered a near 70% reduction in value from its December highs. Investors from South Korea maintain about a 43% stake in this particular fund, reflecting a substantial risk distribution among retail portfolios.

The proclivity of South Korean investors to engage in high-risk financial instruments reflects a broader cultural trend, seeking rapid wealth accumulation despite frequent setbacks in volatile assets such as cryptocurrencies. Despite recent setbacks, their interest in Tesla's fluctuating stock remains vigorous, driven by the allure of its high volatility and potential rapid gains.

Industry observers caution against the dangers inherent in such speculative investments. Nonetheless, demand for leveraged ETPs continues to surge globally, partly spurred by bullish markets following periods of economic optimism. Meanwhile, undercurrents of financial unpredictability, like macroeconomic policies and market sentiment shifts, continue to pose threats to these speculative financial instruments.