South Korea’s single-stock leveraged ETF assets have exceeded 100 trillion won, making it difficult to implement delisting measures

Odaily Planet Daily News: Today, Kim Yong-beom, head of the presidential office policy office of South Korea, said that regarding single-stock leveraged ETFs that have recently sparked controversy over stock-market volatility, the government will study additional and improved measures. However, in reality it is difficult to take delisting measures. Currently, the size of single-stock leveraged ETFs has exceeded 10 trillion won, and investors have already participated in trading. If they were forced to be delisted, “it would itself cause a huge impact on the market,” so delisting is not realistic. These products were launched after in-depth discussion; besides meeting investment demand, they also serve the policy goal of attracting overseas-market capital back to South Korea, and this is not a policy mistake.

Kim Yong-beom said that such products have structural risks and still need further optimization, especially the management mechanism for the “deviation rate” between the ETF and the underlying asset price. To maintain the target multiple, leveraged ETFs may concentrate trading during periods of rapid market fluctuation, which can strengthen selling pressure in a short time. Regulators, asset management companies, and securities firms need further discussion on how to reduce the product’s impact on the market in specific periods, including whether adjustments need to be completed within 30 minutes, whether the adjustment window can be extended, and whether risk can be managed through other derivatives. (KBS)