Korean single-stock leveraged ETF market cap exceeds 10 trillion won, making delisting measures unrealistic

Odaily Odaily reports that Kim Yong-beom, head of the Office for Government Policy Coordination under the South Korean presidential office, stated today that in response to single-stock leveraged ETFs, which have recently sparked controversy over stock market volatility, the government will study and implement supplementary improvement measures. However, it is realistically difficult to take delisting measures. Currently, the scale of single-stock leveraged ETFs has already exceeded 10 trillion won, and investors have already participated in trading. Forcible delisting would itself cause a huge shock to the market, making it unrealistic. These products were launched after thorough discussion. Besides meeting investment demand, they also serve the policy purpose of attracting funds that flowed to overseas markets back to the Korean market, and are not a policy failure.

Kim Yong-beom pointed out that these products carry structural risks and still require further optimization, especially the management mechanism for the deviation rate between the ETF and the price of the underlying asset. To maintain the target leverage multiple, leveraged ETFs may execute concentrated trades during periods of rapid market fluctuations, thereby intensifying short-term selling pressure. Regulators, asset management companies, and securities firms need further discussion on how to reduce the impact of these products on the market during specific periods, including whether to mandate that adjustments be completed within 30 minutes, whether to allow for extended adjustment periods, and whether risk management can be achieved through other derivative methods. (KBS)