Single-stock leveraged exchange-traded funds (ETFs) could launch as early as May. ETFs that track the share price gains of Samsung Electronics and SK hynix at twice the rate are expected to be introduced first.

Closing prices are displayed on the electronic board in the dealing room at the Hana Bank headquarters in Jung-gu, Seoul, on the afternoon of the 20th. The KOSPI closes at 5,781.20, up 17.98 points (0.31%) from the previous trading day. In the Seoul foreign exchange market, the dollar-won rate records 1,499.40 won, down 1.60 won from the 3:30 p.m. weekly close the previous day. /Courtesy of News1

On the 22nd, according to the investment industry and financial authorities, ETFs that track a single stock's return at ±2 times are expected to launch as early as May.

In this regard, the financial authorities plan to release detailed enforcement rules for the Financial Investment Business Regulations within this month. The rules are expected to specify requirements related to futures so that termination (risk diversification) proceeds smoothly, along with criteria tied to the market capitalization and trading volume of the underlying assets.

Samsung Electronics and SK hynix are expected to be the first stocks to launch. The financial authorities are reportedly giving serious consideration to first rolling out single-stock leveraged ETFs with Samsung Electronics and SK hynix as underlying assets.

Given the recent increase in stock market volatility, authorities appear to have judged that broadly allowing single-stock leveraged ETFs across various stocks would pose significant risks, including potential investor harm.

More aggressive ETF products are also on the way. These include fully active ETFs and ETFs linked to the KOSDAQ premium index.

A fully active ETF is not subject to index-tracking constraints that require a minimum correlation coefficient of 0.7 with the benchmark index. As a result, a fund manager's discretion in management is broadly allowed. It is closer to a publicly offered mutual fund in a listed form.

An ETF linked to the KOSDAQ premium index is tied to the government's restructuring of the KOSDAQ market. Recently, the government has been pushing to introduce a promotion and relegation system in the KOSDAQ market and reorganize it into two leagues, premium and standard. Among them, only the top-tier blue-chip companies in the premium league would be selected to create a separate index, and the plan is to release an ETF that tracks it.

The financial authorities are aiming to introduce a bill to amend the Financial Investment Services and Capital Markets Act for fully active ETFs in the first half, and to launch products linked to the KOSDAQ premium index early next year.

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