South Korean president responds to controversy over Samsung and SK Hynix single-stock leveraged ETFs: strengthen regulation when necessary, supplementary measures to be introduced soon

Odaily reported that South Korean President Lee Jae-myung stated at a cabinet meeting today that the market widely criticizes single-stock leveraged ETFs for "excessively amplifying market volatility" and urged relevant authorities to "promptly and adequately improve the related system." Although regulators have taken certain measures, investors believe these products have exacerbated market fluctuations and declines, exposing efficiency issues at the policy level. In response to the market controversy sparked by single-stock leveraged ETFs linked to Samsung Electronics and SK Hynix, Lee Jae-myung said financial regulators should formulate and enhance relevant supporting measures as soon as possible, and study the introduction of further countermeasures when necessary.

The Financial Services Commission (FSC) of South Korea explained that the introduction of single-stock leveraged ETFs aims to reduce capital outflows caused by overseas stock investments and bring investors within the domestic regulatory framework. Given that overseas markets already offer 2x to 3x leverage products, this initiative helps guide funds to remain in the Korean market. The FSC noted that the scale of overseas leveraged products has declined, and the net overseas stock investment by Korean individual investors dropped from approximately USD 40 billion last year to USD 2.8 billion in the first half of this year, which has played a role in stabilizing the exchange rate.

However, market participants continue to question that single-stock leveraged ETFs have amplified market turbulence amid the recent sharp fluctuations in semiconductor stocks. In response, Lee Jae-myung emphasized that the South Korean government needs to continuously monitor market impacts and introduce additional measures when necessary. (NATE)