South Korean President Responds to Samsung and SK Hynix Leveraged ETF Controversy: Will Strengthen Regulations if Necessary and Expedite Supplementary Measures

Odaily reported that during a state council meeting today, South Korean President Lee Jae-myung pointed out that there is widespread market criticism that single-stock leveraged ETFs “excessively amplify market volatility,” and called on relevant authorities to “swiftly and adequately improve related systems.” Although regulators have taken certain measures, investors believe that these products have exacerbated market fluctuations and declines, exposing inefficiencies in policy. In response to the market controversy sparked by single-stock leveraged ETFs for Samsung Electronics and SK Hynix, Lee Jae-myung stated that financial regulatory authorities should formulate and improve relevant supporting measures as soon as possible, and consider introducing further countermeasures if necessary.

The Financial Services Commission (FSC) of South Korea explained that the purpose of launching single-stock leveraged ETFs is to reduce capital outflows caused by overseas stock investments and bring investors under the domestic regulatory framework. Currently, 2x to 3x leveraged products already exist in overseas markets, and this move aims to help retain capital within the South Korean market. The FSC stated that the scale of overseas leveraged products has declined, and net overseas stock investments by South Korean individual investors have also dropped from approximately $40 billion for the whole of last year to $2.8 billion in the first half of this year, playing a certain stabilizing role for the exchange rate.

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