President Lee Jae-myung on the 21st, regarding single-stock leveraged exchange-traded funds (ETF) for Samsung Electronics and Hynix that have been cited as a cause of the recent increase in stock market volatility, said, "Because they happened to be introduced right at the peak when (the stock market) was surging and then correcting, it seems there was an optical illusion that made it look as if this alone caused serious problems." He then ordered that complementary measures be drawn up thoroughly.
Presiding over a cabinet meeting at Cheong Wa Dae that day, Lee said, "It seems to be taking too long (to release the complementary measures)," adding, "We need to make the complementary measures swiftly and thoroughly." On the complementary measures the government released last week, centered on "raising deposit requirements and mandatory education hours," Lee said, "There is criticism asking whether that will be enough," and instructed, "If necessary, prepare additional measures."
However, Lee also offered the view that the timing of introducing single-stock leveraged ETFs was overly interpreted because it coincided with a sharp upswing in the stock market. Lee said, "There is an aspect that created an optical illusion as if this alone caused serious problems," and added, "Overseas, leveraged products originally went up to three times." He also explained the background of the introduction, saying, "Since domestic investors' overseas investments were causing foreign exchange outflows, it was created to encourage domestic investment for foreign exchange stability."
He added that the product was introduced to curb foreign currency outflows and stabilize the exchange rate. Lee said, "Although we aimed for a policy effect in terms of exchange rate stability, the public doesn't have to take that into account," and reiterated, "From the perspective of stock market participants, policy inefficiencies or problems appear much larger, so we need to make the complementary measures swiftly and thoroughly."
When Presidential Policy Chief Kim Yong-beom said to the effect that "the introduction of leveraged ETFs also produced a net effect of reducing foreign currency outflows," Lee responded, "That is the effect of government policy, and since stock market participants think volatility and declines have widened because of this, it is also our job to craft complementary measures." He added, "If we defend on this side (the exchange rate), then problems arise on this side (stock market volatility). It's really hard," and said, "Let's cope with it wisely."
Earlier, on the 16th, after a macroeconomic and financial issues meeting (F4 meeting), the government decided to ▲ raise the mandatory deposit for trading single-stock leveraged ETFs from 10 million won to 30 million won starting next month and ▲ increase the minimum purchase size per order to 20 shares starting in November. The procedure for designating investment warning issues will also be reduced from three steps to two. In addition, the mandatory education time required to invest in the product will increase from the current two hours to three hours.