Korean Financial Supervisory Commission responds to controversy: A single-stock leveraged ETF is not the culprit behind market volatility

Deep Tide TechFlow message: On July 17, according to Yonhap News Agency, the Financial Services Commission (FSC) of South Korea said that single-stock leveraged ETFs have played a clear role in preventing funds from flowing to overseas stock markets. The FSC also noted that the volatility of U.S. and Japanese semiconductor stocks has similarly expanded in recent times, and responded to a controversy in which outsiders claim that single-stock leveraged ETFs are the “culprit” behind the recent worsening volatility in the South Korean stock market.

Byun Je-ho, director of the FSC’s Capital Markets Bureau, said: “Some of the investment demand that was originally heading to overseas markets has returned to the domestic market, and it has also indeed helped curb additional new funds from continuing to flow to overseas markets.” He added: “I believe that since the launch of the products, the increased volatility in the Korean stock market cannot be explained solely by single-stock leveraged ETFs. Against the backdrop that capital in the Korean market is highly concentrated in Samsung Electronics and SK Hynix, expectations for and concerns about the global semiconductor industry have been swinging back and forth, which is what ultimately led to the expansion of the volatility of related products.” (Jinshi)