South Korea’s President responds to controversy over leveraged ETFs by Samsung and SK Hynix: if necessary, step up regulation, and roll out a supplementary plan as soon as possible

Odaily Planet Daily report. South Korean President Lee Jae-myung said at today’s cabinet meeting that the market generally criticizes a single-stock leveraged ETF for “excessively amplifying market volatility,” and urged relevant authorities to “quickly and fully improve the related regulatory framework.” Although regulators have taken certain measures, investors believe the relevant products have intensified market volatility and declines, exposing efficiency issues at the policy level. When responding to market controversy over Samsung Electronics and SK hynix single-stock leveraged ETFs, Lee Jae-myung said financial regulators should quickly develop and fully improve the relevant supporting measures, and study further countermeasures if necessary.

The Financial Services Commission of Korea explained that launching single-stock leveraged ETFs is intended to reduce capital outflows caused by overseas stock investments and to bring investors under the domestic regulatory system. At present, overseas markets already have 2 to 3 times leveraged products, and this move helps guide funds to remain in the South Korean market. The FSC said the scale of overseas leveraged products has declined, and South Korean individual investors’ net overseas stock investment fell from about $40 billion for last year as a whole to $2.8 billion in the first half of this year, which has played a certain role in stabilizing the exchange rate.

However, market participants have continued to question that single-stock leveraged ETFs magnified market shakeouts during the recent period of sharp volatility in semiconductor stocks. In response, Lee Jae-myung emphasized that the South Korean government needs to keep monitoring market impact and introduce additional measures when necessary. (NATE)