Financial Services Commission Chairperson Lee Eok-won to Announce Measures Soon to Address Single-Stock Leveraged ETFs

[Financial News] Financial authorities will soon announce corrective measures for single-stock leveraged exchange-traded fund (ETF) products, which have been cited as one of the factors behind recent stock market volatility.
Lee Eok-won, Chairperson of the Financial Services Commission(Photo) appeared on Kim Eo-jun's News Factory on the 16th and said that, regarding the impact of single-stock leveraged products on recent volatility in the domestic stock market, "that part does seem to be somewhat of a problem." He added, "We are closely reviewing the extent of the impact and considering countermeasures, and we plan to prepare them quickly and announce them soon." Lee also explained that the Market Situation Review Meeting, which includes the Ministry of Economy and Finance, the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service, is coordinating comprehensive measures to stabilize the market.
Lee said the main reason for the recent increase in volatility in the domestic stock market is the heavy concentration in the semiconductor sector. He analyzed that "the market is being shaken every time micro-level news emerges, carrying both expectations and concerns, after stock prices surged sharply in a short period amid the semiconductor supercycle."
He also said the shock was amplified by the rapid expansion of the dominance of major semiconductor companies in the KOSPI (Korea Composite Stock Price Index) market. According to Lee, the combined KOSPI market capitalization share of Samsung Electronics and SK hynix rose from about 22% at the end of June last year to 30% at the end of last year, and has now climbed to 52% to 53%. Including stocks related to the semiconductor ecosystem, such as SK Square and Samsung C&T Corporation, the figure reaches about 60% of total market capitalization.
Lee added, "In the past, even when the market was shaken, the area directly absorbing the shock was around 22% to 30%. Now, however, a structure in which as much as 60% must absorb the shock all at once makes volatility feel much greater."
He took a cautious stance on whether to introduce strong regulations such as a temporary trading suspension or delisting of single-stock leveraged ETFs, an idea raised in some market circles. Lee said, "Because the market has its own domain, artificial forced measures could create even greater side effects," adding that "we are comprehensively reviewing institutional remedies."
Lee said, "When the system was introduced, the goal was to bring demand for high-risk products in overseas markets into the regulated system, manage them transparently, and protect investors." He emphasized, "Since these products are highly speculative, short-term high-risk investments, we will significantly strengthen risk management and guidance on investor precautions."

elikim@fnnews.com Kim Mi-hee Reporter