The Citizens' Coalition for Economic Justice (CCEJ) criticized the rapid price swings in Korea's stock market as driven by the government's hasty policy stance and said policymakers should be held accountable.
In a commentary on the 30th, CCEJ said it was concerned about heightened stock market volatility and noted that volatility at a level hard to explain by a simple industry downcycle or external factors had emerged. It added that investor sentiment had rapidly deteriorated and that in the KOSDAQ market, declines had spread across small and venture companies, deepening marketwide anxiety.
CCEJ said the episode was the result of losing big for small gains that exposed a hasty policy stance. CCEJ said the government had repeatedly sent overly optimistic signals and created a high-risk investment environment, and said the government should take seriously that, as a result, investors' risk appetite expanded and market volatility increased.
It singled out the rollout of single-stock leveraged exchange-traded funds (ETFs) as a core policy failure in this episode. CCEJ pointed to instances in which, after volatility expanded following the launch of leveraged products, the government belatedly released supplementary steps such as raising the basic margin requirement, saying that was effectively an admission they were introduced rashly.
CCEJ said Policy Chief Kim Yong-beom and the financial authorities introduced the products under the pretext of eliminating cross-border regulatory asymmetries, but approached issues such as volatility incomparable with ordinary ETFs, potential market shocks, and risk management far too complacently.
It added that the government should thoroughly investigate the product introduction process and the policy decision path and clearly determine where responsibility lies, including that of Policy Chief Kim Yong-beom.
It said the government should prepare more sophisticated product designs and risk management systems that can minimize market shocks, rather than simply tightening regulations after the fact.
It also called for stronger measures for the KOSDAQ market. CCEJ warned that in the KOSDAQ market recently, concerns are growing that even the fundraising function of growth corporations could be weakened, and said that if technology corporations and venture corporations continue to be unable to receive fair valuations due to a temporary market shock, it could negatively affect the entire innovation ecosystem.
CCEJ urged the financial authorities to prepare separate measures for liquidity, market making, disclosure management, and investor protection in the KOSDAQ market.
CCEJ said a sound capital market is built on corporations' value and investor trust and should not set short-term stock index gains themselves as a policy goal.