Bank of Korea Warns Samsung and SK Hynix Leveraged ETFs May Intensify Market Volatility

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On July 5, South Korean media reported that the Bank of Korea warned that single-stock leveraged ETFs linked to Samsung Electronics and SK Hynix could further exacerbate market concentration, amplify market volatility, and strengthen unilateral trading capital flows. In a written response submitted to National Power Party lawmaker Park Sung-hoon, the Bank of Korea stated, "Given that Samsung Electronics and SK Hynix account for more than half of the total market capitalization and trading volume of the Korean stock market, expanding the investment scale of single-stock leveraged ETFs may further intensify market concentration." The Bank of Korea noted that as corporate performance or market expectations change, increased inflows and outflows of funds could amplify unilateral trading in these products. Moreover, if the market experiences a correction, retail investors' losses could be further magnified, and increased ETF redemptions or portfolio rebalancing could also exacerbate price fluctuations of 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 financial system.
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