KOSPI Plunges Over 43% from High! South Korea Announces Measures to Limit Retail Participation in Leveraged ETFs After Two Consecutive Circuit Breakers

Following two consecutive days of market-wide circuit breakers in South Korean stocks, the South Korean government announced a new round of stabilization measures on the evening of March 29th. The core of these measures is to target 'retail leveraged ETFs.' South Korean Deputy Prime Minister and Minister of Economy and Finance, Go Yoon-jhe, chaired an emergency meeting attended by the heads of the Financial Services Commission and the Financial Supervisory Service. In a statement after the meeting, the authorities said, 'Concentrated trading of single-stock leveraged products is exacerbating volatility. The authorities promise a swift and decisive response.' Specific directions include restricting retail participation in leveraged ETFs, with plans to regulate the upper limit of such products in individual investment portfolios and to increase transaction costs. Drawing on overseas precedents such as Hong Kong's flexible leverage system, the government will push for legal amendments to grant regulatory authorities emergency market stabilization powers. The government maintains the highest state of alert, with around-the-clock monitoring of the stock market. The South Korean composite stock index (KOSPI) has plummeted over 43% from its June high of around 9,115 points, triggering circuit breakers on Tuesday and Wednesday of this week. SK Hynix announced its Q2 revenue on Wednesday, raising doubts about the AI memory market, accelerating retail sell-offs, and causing the dual giants to drop more than 10% intraday. The South Korean government has determined that this crash is not due to a fundamental collapse but rather a liquidity crunch caused by retail investors concentrating on single-stock leveraged ETFs (betting on Samsung and Hynix), adding to positions pro-cyclically and blowing up counter-cyclically. The three-pronged approach of position limits, fee increases, and legal amendments aims to cut off retail access to 'borrowing money to buy two times semiconductors,' forcibly pulling the market back to 'fundamental pricing' from 'leveraged bull.'