What did the head of South Korea’s Financial Supervisory Service say? He is very regretful about introducing leveraged ETFs—back then, he should have just lain down and stopped it.

BlockBeats News, June 23 — Lee Chan-jin, the head of the Financial Supervisory Service of South Korea, stated on the 22nd that he regrets the introduction of single-stock leveraged ETFs for Samsung Electronics and SK Hynix, admits policy failure, and revealed preparations for investor safety measures. Regarding Korea’s debt investment boom, Lee Chan-jin said to be cautious of the statistical illusion caused by the increase in total market capitalization of the stock market, which leads to a decrease in the proportion of credit trading financing balance to total market value, and a perceived decline. Lee Chan-jin’s full statement at the press conference is as follows:

Admits failure of single-stock leveraged ETF policy, says "very regretful"

Lee Chan-jin expressed clear regret over the introduction of Samsung Electronics and SK Hynix single-stock leveraged ETFs at the end of last year to counter high exchange rates, and strongly worries about overheated investments. The system was introduced at the end of last year to address the persistent high won exchange rate, aiming to channel retail demand for "overseas stock investments" back into the domestic stock market. Lee Chan-jin pointed out: "The extremely high turnover rate of these products is resulting in only securities firms getting rich. I am worried this could turn into a casino where the house always wins, and I personally worry that real retail investors are not gaining actual benefits, only the management and operational systems profit. When the product’s turnover rate approaches 200%, the transaction fees that securities firms can earn could reach up to 10 trillion Korean won. I am reflecting on whether I should have done everything possible to stop it back then, and I am very regretful now."

Warns that leveraged ETFs "only make brokerages money," investor protection measures underway

Lee Chan-jin expressed strong concern about the high turnover rate of leveraged ETFs and warned that the overheated situation has not eased. "Although the Financial Supervisory Service recently issued related consumer alerts, the situation has not cooled down. Most investors are middle class and ordinary citizens, and if the stock market fluctuates, it could cause huge shocks to families, so we are considering additional safety measures." Regarding specific measures, Lee Chan-jin said: "We are studying ways to mitigate external shocks related to credit, and will discuss with policy authorities how to handle measures from margin trading to credit in phases."

Concern over debt investment boom, cautious of statistical illusion

Regarding the overall Korean stock market and borrowing investment situation, Lee Chan-jin pointed out that market instability and trading concentration are worsening. "Trading turnover and other indicators are rising sharply, and market instability and volatility have increased significantly. Especially, the concentration of trading mainly in semiconductor stocks is expanding. Although borrowing investments have also increased substantially, as the total market value rises, the proportion of credit financing balance to total market value is decreasing, creating an ironic perception of decline. To avoid being misled by statistical illusions, we are closely monitoring this, and are taking it very seriously."

States that the failure of SpaceX new stock subscription for Korean retail investors is unbelievable

Regarding the recent failure of SpaceX new stock allocation for Future Asset Securities, Lee Chan-jin expressed strong dissatisfaction. "Not a single share was allocated, which I cannot understand. The allocation process is simply unbelievable. From an investor’s perspective, this is very inconvenient and unsatisfactory. If I hadn’t participated in the new stock subscription, I could have bought the stock on the first day of listing, but weren’t those funds trapped in the (new stock subscription)?" Lee Chan-jin later added: "To protect investors and prevent this from happening again, we will share the results of our investigation into Future Asset Securities."