President Lee Jae-myung said the government should "swiftly and properly prepare complementary measures" regarding single-stock leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK hynix, which are cited as a recent driver of expanded volatility in the Korean stock market. At a government ministry briefing at Cheong Wa Dae on the 15th, Lee asked Korea Exchange (KRX) Chairman Jeong Eun-bo, "It's noisy here because of ETFs too, right?" and ordered measures. He also said, "Normalizing and advancing the capital market is an important task, so keep a close eye on it."
In particular, Lee told Financial Supervisory Service Governor Lee Chan-jin, "It seems you've taken a lot of hits recently over the single-stock leveraged ETF issue." Lee replied, "As the market manager, I am responsible and am taking responsibility." Earlier, at a press briefing last month, Lee said he regretted not blocking single-stock leveraged ETFs that were criticized for greatly amplifying market volatility and causing investor losses and confusion, noting, "I regret not having stopped it, even if I had to lie down, before accepting the securities registration statement."
Authorities have reportedly asked the financial investment industry to prepare measures to "strengthen investor protection" in this regard. Proposals under discussion include raising the basic margin requirement or setting investment limits to heighten entry barriers themselves. Kim Yong-beom, the presidential policy chief at Cheong Wa Dae, also said at a Cheong Wa Dae briefing on the 10th, "If supplementation is needed, I think the Market Situation Check Meeting (F4) will make a decision."
The F4 meeting is a consultative body where Deputy Prime Minister and Minister of Strategy and Finance Koo Yun-cheol, Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eog-weon, and Financial Supervisory Service Governor Lee Chan-jin gather to discuss macroeconomic and financial market issues. At the time, Kim said, "Because it is a newly introduced system, we plan to closely examine what impact it has on the market," adding, "F4 will review and discuss it."
◇ U.S. Bloomberg: "Allowing leveraged ETFs amid an overheated stock market poured fuel on the fire"
The controversial single-stock leveraged ETFs are high-risk products designed to track twice the daily price swings of Samsung Electronics and SK hynix. They broaden investor choices and can amplify returns when stock prices rise. Conversely, losses grow that much when prices fall, making them, in effect, strongly speculative yet legal. By their nature, trading concentrates in certain large-cap stocks, increasing spot prices and overall index volatility. Related products were launched in Korea on May 27.
U.S. business outlet Bloomberg cited the "launch timing" as the reason leveraged ETFs based on SK hynix as the underlying asset plunged more than 40% in just over a month since listing. In a column titled "Korea's leveraged ETFs are the worst timing," Bloomberg said, "At the time of launch (May 27), the KOSPI was overheated as the world's hottest stock market thanks to the AI boom, and brokerage account cash balances were at a record high," adding, "In such a situation, regulators allowing leveraged products 'poured fuel on the fire.'" It added, "Korean retail investors ended up missing most of the upswing and shouldering only the plunge."