A single-stock leveraged financial product that tracks Samsung Electronics and SK hynix shares at ±2 times will launch on the 27th. Financial authorities are concerned that, on top of the recent sharp swings in Korea's stock market, investors who do not fully understand single-stock leveraged products could buy them and suffer excessive losses.
According to the financial investment industry on the 25th, a single-stock leveraged product that tracks the daily volatility of Samsung Electronics and SK hynix at ±2 times will be listed on the Korea Exchange (KRX) on the 27th.
As single-stock leveraged products already exist overseas, this product has been introduced to resolve asymmetric regulation issues and meet diverse investment demand.
However, financial authorities remain concerned about potential investor losses. Because leveraged products are high-risk investments, investors who lack understanding may engage in speculative trading and incur excessive losses.
In particular, the share price swings of Samsung Electronics and SK hynix, which will serve as the underlying assets of the single-stock leveraged products, have been large recently. Authorities are also watching whether the launch of these products could amplify stock market volatility due to excessive concentration of funds.
Single-stock leveraged products differ from typical exchange-traded funds (ETFs), which are based on diversification, because they use individual stocks as the underlying asset. Losses of up to 60% can occur in a single day, and in a sideways market, a "negative compounding effect" can reduce invested capital, so caution is needed.
Reflecting these concerns, the term "ETF," which implies diversification, was removed from the product name. In addition to the existing one-hour pre-education, a separate one-hour advanced course was required. Protective measures were also put in place, including requiring a minimum deposit of at least 10 million won.
In addition, financial authorities told financial companies to refrain from excessive marketing activities. The Financial Supervisory Service reportedly asked companies to avoid marketing that could mislead investors ahead of the product launch.