South Korean Government to Explore Measures to Minimize Impact of Leveraged Products Market

Kim Yong-bum, head of the policy office at the South Korean presidential office, stated that the recent drastic fluctuations in stock prices have been largely attributed to single-stock leveraged ETFs, and the idea of delisting them is "unimaginable." Investors have deeply engaged with these products, which exceed 100 trillion won in scale, and a forced delisting would have a significant impact on the market, necessitating the absorption of selling pressure. Kim affirmed the supplementary measures recently introduced by financial regulators, including raising the margin requirement for leveraged ETFs to 30 million won in cash and setting a minimum trading unit of 20 shares, indicating that these measures have substantially addressed the issues reflected by the market and will mitigate side effects once implemented. He pointed out that the influence of leveraged products on the market will be magnified in a declining market, and discussions need to be held with regulatory authorities, asset management companies, and brokerages on how to minimize market shocks during specific periods, particularly by reducing the divergence rate between the net asset value of ETFs and their actual closing prices, and reasonably controlling the selling pressure arising from narrowing divergence rates.