The recent introduction of single-stock leveraged Exchange Traded Funds (ETFs) in South Korea has attracted substantial retail investment, totaling 14 trillion won ($9.7 billion), significantly outpacing foreign investment of about 2 trillion won.
However, this surge in speculative trading has resulted in heavy losses for investors, particularly in the context of a sharp correction in the Kospi index, which has dropped nearly 35% in the past month.
The downturn has been exacerbated by declines in major chip stocks, with the KODEX SK Hynix Single Stock Leverage ETF plummeting over 80% since its peak on June 23, and the Samsung equivalent falling nearly 75% since June 3.
In response to the situation, Finance Minister Koo Yun-cheol acknowledged the need for an apology during a parliamentary session, indicating that the introduction of these products lacked sufficient oversight.
Additionally, the Financial Services Commission is contemplating restricting access to leveraged ETFs to professional investors only and may consider reducing the leverage multiple to mitigate volatility. These developments underscore the potential for regulatory changes in the wake of significant investor losses and the need for greater caution in the trading of leveraged financial products