Bank of Korea warns that leveraged ETFs on Samsung and SK Hynix may exacerbate market volatility.

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Golden Finance reported on July 5, citing local media, that the Bank of Korea has warned that single-stock leveraged ETFs linked to Samsung Electronics and SK Hynix may further worsen market concentration, amplify market volatility, and strengthen one-sided trading capital flows. According to Yonhap News Agency, in a written reply submitted to People Power Party lawmaker Park Sung-hoon, the Bank of Korea said: “Given that Samsung Electronics and SK Hynix account for more than half of South Korea’s total market capitalization and trading value, expanding investment in single-stock leveraged ETFs may further exacerbate market concentration.” The Bank of Korea added that as companies’ operating conditions or market expectations change, capital inflows and outflows increase, and these products may amplify one-sided trading. In addition, if the market undergoes a pullback, losses for retail investors may further widen, while increased ETF redemptions or portfolio rebalancing may also intensify price volatility in the related stocks. According to Yonhap News Agency, the Bank of Korea plans to strengthen monitoring of the impact of single-stock leveraged ETFs on the stock market and the financial system.
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