South Korea Orders Review of Single-Stock Leveraged ETFs After Market Criticism

South Korean President Lee Jae-myung said at a Cabinet meeting that single-stock leveraged ETFs have been criticized for excessively amplifying market volatility and urged authorities to improve related rules quickly and fully. According to Odaily, he said financial regulators should prepare supporting measures as soon as possible and study additional steps if needed. Lee made the remarks while responding to market debate over Samsung Electronics and SK Hynix single-stock leveraged ETFs. He said the government should continue monitoring market effects and take extra measures when necessary. The Korea Financial Services Commission said single-stock leveraged ETFs were introduced to reduce capital outflows caused by overseas stock investment and to bring investors under domestic regulation. It said overseas markets already offer leveraged products with two to three times leverage and that the products help keep funds in South Korea. The commission also said overseas leveraged product volumes have declined, while South Korean individual investors' net overseas stock investment fell from about $40 billion last year to $2.8 billion in the first half of this year. It said this has had some effect on stabilizing the exchange rate. However, market participants have continued to question whether single-stock leveraged ETFs have amplified swings in the recent volatility in semiconductor stocks.