Former lawmaker Kim Seong-tae of the People Power Party stated on the 20th that financial authorities should have intervened when single-stock leveraged ETFs were first introduced as products, citing concerns over increased market volatility. Kim made the remarks during an appearance on KBS Radio, criticizing the speculative nature of funds concentrated in major companies. The criticism follows financial authorities' announcement of measures raising the basic deposit requirement for single-stock leveraged ETF investors from 10 million won to 30 million won and limiting collateral recognition to cash only.
Kim Seong-tae Criticizes Regulatory Timing on Leveraged ETFs
Kim Seong-tae, chairman of the People Power Party's Seoul Gangseo-eul party committee, stated on KBS Radio's program on the 20th that "it was obvious that the Korean stock market would become a speculative arena when companies enjoying a boom attracted massive funds." He pointed out that the KOSPI is currently moving centered on Samsung Electronics and SK Hynix stock prices, stating "this is clearly not normal" compared to a normal market environment.
Kim criticized the government's response as insufficient, stating "raising the basic deposit and recognizing only cash collateral does not solve the problem." He added that "foreign investors have already left and the credibility of the Korean stock market has been somewhat damaged." Kim further stated that "these leveraged ETF products ultimately ruined the stock market" after previously contributing to optimism about KOSPI reaching 5,000 or even 10,000.
Financial Authorities Raise Deposit Requirements to 30 Million Won
Financial authorities announced supplementary measures for single-stock leveraged ETFs, raising the basic deposit requirement for investors from the existing 10 million won to 30 million won. The new measures also stipulate that deposits will only be recognized in cash form. Kim characterized the government policy as "limiting entry to a certain extent from now on to prevent harm, nothing more, nothing less," while expressing concern that "the market structure has already been formed and the problem is unmanageable."
Park Seong-jun Assesses Delisting as Unlikely
Democratic Party lawmaker Park Seong-jun, who appeared on the same KBS Radio program on the 20th, acknowledged the problems with single-stock leveraged ETFs while assessing the possibility of delisting as low. Park stated that leveraged ETFs "are extremely speculative" and expressed regret that "financial authorities introduced them too complacently at the beginning."
Park explained that "the intention was to invigorate capital liquidity, but it strengthened volatility and became an element of stock market instability," noting that "because the elements of dissatisfaction are so large, there is even talk of abolition." However, he drew a line on the leveraged ETF delisting argument raised in some quarters, stating "once something is created, abolition is too difficult."
Park added that "the problem is that capital has already entered, and when more than 10 trillion won has entered, how to stabilize this," concluding that "I think the volatility is so large that this part needs to be corrected and supplemented, but the abolition itself does not seem easy."
FAQ
What measures did South Korean financial authorities announce for single-stock leveraged ETFs?
Financial authorities announced measures raising the basic deposit requirement for single-stock leveraged ETF investors from 10 million won to 30 million won, and stipulated that deposits will only be recognized in cash form.
Why did Park Seong-jun assess delisting of leveraged ETFs as unlikely?
Park Seong-jun stated that delisting is difficult because capital has already entered the products, with more than 10 trillion won invested, making it challenging to unwind the positions safely despite the high volatility and market concerns.
