South Korean President Lee Jae-myung on Wednesday called for the rapid introduction of complementary measures for the recently launched single-stock leveraged exchange-traded funds (ETFs), which are widely believed to have exacerbated stock market volatility.
When President Lee Jae-myung listened to policy reports from various economic-related government departments at the Cheong Wa Dae Presidential Palace, he said: "It is necessary to formulate supporting and supplementary countermeasures quickly and efficiently."
In May this year, South Korea launched a single-stock leveraged ETF that tracks the intraday prices of two major heavyweight stocks, Samsung Electronics and SK Hynix. The market believes that such products are the main reason for the recent violent fluctuations in South Korea's local stock market. It was against this background that Lee Jae-myung made the above remarks.
The combined market capitalization of Samsung Electronics and SK Hynix accounts for approximately half of the total market capitalization of the Korea Composite Stock Price Index (KOSPI). Therefore, such leveraged products are artificially considered to be one of the important factors exacerbating the fluctuations of the benchmark stock index.
High-level policy officials, including South Korea's Deputy Prime Minister of Economy and Minister of Finance Koo Yoon-cheol, have expressed concerns about the negative effects of such ETFs and promised to formulate supporting and supplementary countermeasures to solve related problems and better protect the rights and interests of investors.