Single-stock leveraged exchange-traded fund (ETF) trading volume in South Korea plunged 93.2% following regulatory tightening, with NH Amundi Asset Management and Timefolio Asset Management's decision to avoid this product category now drawing attention. Daily trading volume of 16 single-stock leveraged and inverse ETFs fell from 12.4485 trillion won on July 30 to 845.2 billion won as of this month 7th, according to the financial investment industry on the 16th. Financial regulators raised the minimum cash deposit requirement for individual investors from 10 million won to 30 million won effective July 31, while also suspending new listings and prohibiting advertising. Asset managers that chose not to participate in the single-stock leveraged ETF competition are now being re-evaluated for their risk management approach and investment philosophy.
Regulatory Changes Drive 93.2% Trading Volume Decline
The Financial Services Commission implemented stricter requirements for single-stock leveraged products starting July 31. The regulator increased the basic deposit requirement for individual retail investors from 10 million won to 30 million won, with substitute securities such as stocks, ETFs, and bonds excluded from deposit calculations. Investors must now hold 30 million won or more in cash to make new or additional purchases. Trading volume for the 16 single-stock leveraged and inverse ETF products dropped below 1 trillion won for the first time since listing on the 5th.
NH Amundi Focuses on Megatrend ETFs Instead
NH Amundi Asset Management chose not to launch single-stock products despite meeting the requirements for leveraged ETF issuance. The company concentrated on megatrend ETFs targeting long-term industrial growth in semiconductors, artificial intelligence (AI), and physical AI. An NH Amundi Asset Management official stated: "We determined that investing in long-term growing megatrends, rather than tracking short-term volatility, aligns with our company's ETF strategy."
Timefolio Maintains Active Diversification Strategy
Timefolio Asset Management, recognized as a leader in active management, maintained its strategy of stock selection and weight adjustment through active diversified investment rather than tracking daily fluctuations of specific stocks by multiples. A senior company official explained: "As an active ETF specialist, we have developed products that align with our principles of diversified investment and long-term management. We determined that single-stock leverage does not match our company's investment philosophy."
Hanyang Securities Issues Pre-emptive Risk Warning
Hanyang Securities released financial education content titled "Leverage Investment Advisory" in late July, warning about the structure and risks of single-stock 2x leveraged ETFs. Analysis using actual data indicated that even if underlying assets return to their original position, significant losses can occur in leveraged ETFs when volatility persists.
Industry Calls for Product Philosophy Shift
Bae Jae-gyu, CEO of Korea Investment Trust Management and known as the "father of ETFs," publicly recommended halting investment in single-stock leveraged ETFs and warned they should be "allowed to die naturally" rather than be delisted. He cited the risk of product value erosion due to daily rebalancing and compound effects when volatility increases and fluctuations repeat. An asset management industry official noted: "In the past, competitiveness was about how quickly you could launch new ETFs. Going forward, what you intentionally choose not to create will also become a criterion showing an asset manager's risk management and philosophy."
FAQ
What regulatory changes caused the single-stock leveraged ETF trading volume to drop 93.2%?
The Financial Services Commission raised the minimum cash deposit requirement for individual investors from 10 million won to 30 million won effective July 31, while excluding substitute securities from deposit calculations and suspending new listings and advertising.
Why did NH Amundi Asset Management avoid launching single-stock leveraged ETF products?
NH Amundi Asset Management determined that investing in long-term growing megatrends in semiconductors, AI, and physical AI, rather than tracking short-term volatility, aligns with the company's ETF strategy, according to a company official.
What warning did Bae Jae-gyu issue about single-stock leveraged ETFs?
Bae Jae-gyu, CEO of Korea Investment Trust Management, publicly recommended halting investment in single-stock leveraged ETFs and stated they should be "allowed to die naturally," citing risks of value erosion from daily rebalancing and compound effects during volatile periods.
