The Bank of Korea (BOK) on the 5th said an expansion of investment in leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK hynix could deepen the concentration in semiconductor stocks.
The Bank of Korea (BOK) said in a written reply submitted the same day to the office of People Power Party lawmaker Park Sung-hoon that "the shares of Samsung Electronics and SK hynix in market capitalization and transaction size have expanded so much that they account for more than half of the stock market." It added, "An expansion of investment in single-stock leveraged ETFs could intensify this concentration."
In the main board market, the market capitalization share of Samsung Electronics and SK hynix was 36.1% at the end of last year. On the 24th of last month, this share rose to 55.3%. Over the same period, the share of transaction value also increased from 27.9% to 63.5%.
On the 24th of last month, the Bank of Korea (BOK), in its "Financial Stability Report," projected regarding single-stock leveraged ETFs that they "will help prevent outflows of domestic investment capital overseas and expand inflows of overseas funds." But within 10 days, it raised the level of warning.
The Bank of Korea (BOK) also said, "A buildup of leveraged ETF investment could, through daily rebalancing and cash-futures arbitrage, increase stock price volatility." It continued, "Single-stock leveraged ETFs can see inflows and outflows grow depending on changes in the related industry environment or market expectations, which could deepen one-sided transaction concentration."
Lee Chan-jin, head of the Financial Supervisory Service, also said at a press briefing on the 22nd of last month, "I personally reflect on whether we should have lain down to block the introduction of single-stock leveraged ETFs."
The Bank of Korea (BOK) said, "We will strengthen monitoring and reviews of the impact of single-stock leveraged ETFs on the stock market and the financial system," adding, "We also plan to work closely with relevant authorities to respond to related risks."