South Korea's Single-Stock Leveraged ETFs Crash; Financial Sector Urges Stronger Investor Protections

(Central News Agency reporter Yang Chi-fang, Seoul, 14th) South Korea's stock index KOSPI dropped sharply by 8.95% yesterday, sending several 'single-stock leveraged ETFs' to historic lows. The market value of related products has significantly evaporated. The financial investment sector is urging stronger investor protection mechanisms for leveraged ETFs, while the opposition party criticizes the government's market-stimulus measures as destabilizing.

KOSPI plummeted yesterday, triggering temporary trading halts in both morning and afternoon sessions, and finally closed at 6,806.93 points—a steep 8.95% decline from the previous day.

South Korea approved the issuance of single-stock leveraged ETFs this year, with products gradually listing from late May, sparking debate in the market.

Today's 'Munhwa Ilbo' reported that Samsung Electronics and SK Hynix shares fell 10% and 15% respectively yesterday. All 14 single-stock leveraged ETFs tracking these individual stocks hit new historic lows. Single-stock leveraged ETFs are highly volatile instruments: when the underlying asset rises, returns are doubled, but losses are equally magnified during declines.

As Samsung Electronics and SK Hynix shares plunged, losses on leveraged products rapidly expanded. The financial investment industry is calling for stronger investor safeguards, including raising minimum margin requirements, setting individual investment caps, and enhancing pre-investment education.

Lee Chan-jin, head of South Korea's Financial Supervisory Service (FSS), stated today that 'false or exaggerated advertising by asset management companies is an extremely serious issue from the perspective of investor protection.' He added, 'It is deeply regrettable that large asset managers, who should serve as industry role models, repeatedly engage in such practices.' He emphasized that the industry must undertake special self-regulatory reforms against market-disrupting behaviors like exaggerated advertising.

According to Yonhap News Agency, Jung Jeom-sik, floor leader of the opposition party People Power Party, criticized during today's parliamentary floor strategy meeting: 'Since last year, the opposition and experts have repeatedly warned about the excessive volatility lurking beneath the KOSPI index, yet the government has exacerbated market instability.'

Jung specifically labeled the forced introduction of single-stock leveraged ETFs for Samsung Electronics and SK Hynix as 'the worst possible decision, turning the stock market into an abnormal gambling den.'

South Korea's central bank governor, Shin Hyun-soo, recently stated that due to the recent sharp rise in Korean stock prices, foreign investors have been steadily reducing their holdings. 'However, I believe foreign selling pressure will ease in the second half of this year.' (Edited by Chen Hui-ping) 1150714

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