SOUTH KOREA | South Korea to Study Further Measures on Single-Stock Leveraged ETFs

South Korean presidential office policy chief Kim Yong-beom said the government will study additional measures for single-stock leveraged ETFs that have recently drawn controversy over stock market volatility. He said delisting is difficult in practice and would cause a major shock to the market if forced. According to Odaily, the size of single-stock leveraged ETFs has exceeded 1 trillion won, and investors are already trading them. Kim said the products were launched after sufficient discussion and were intended not only to meet investment demand but also to attract funds back from overseas markets, and he said they were not a policy mistake. Kim said the products still carry structural risks and need further improvement, especially in managing the deviation between ETF prices and underlying asset prices. He said leveraged ETFs may conduct concentrated trading during sharp market swings to maintain their target leverage ratio, which can increase selling pressure in a short period. He added that regulators, asset managers and securities firms need further discussions on how to reduce the products' market impact during specific periods, including whether rebalancing should be limited to within 30 minutes, whether the adjustment period can be extended, and whether other derivatives can be used for risk management.