Ruling Party Says Anti-Stock-Price Suppression Measures Should Move Faster; Opposition Calls for Delisting of Single-Stock Leveraged ETFs

As South Korea's stock market has recently seen sharp swings and criticism has grown over the so-called 'Roller KOSPI,' the ruling and opposition parties have each proposed their own remedies. The Democratic Party of Korea (DPK) said it would accelerate efforts to improve the stock market's fundamentals by pushing an anti-stock-price suppression law. The People Power Party, meanwhile, pointed to single-stock leveraged exchange-traded funds (ETFs) tied to 'Samsung Electronics and SK hynix' as a major cause of volatility and raised the possibility of delisting them.
DPK lawmakers Lee Hoon-gi and Soyoung Lee agreed on the need to pass amendments to the Inheritance and Gift Tax Act, which would serve as an anti-stock-price suppression measure, as well as amendments to the Financial Investment Services and Capital Markets Act that would require value-up disclosures, during a meeting at the National Assembly on the 21st.
The amendment to the Inheritance and Gift Tax Act, introduced by Lee Soyoung in May last year, is designed to prevent major shareholders from reducing inheritance and gift tax burdens by artificially depressing share prices. It would set a floor for tax calculations by valuing listed shares trading below 0.8 times book value at 80% of net asset value, similar to unlisted shares.
Lawmakers also discussed an amendment to the Financial Investment Services and Capital Markets Act, proposed by Kim Hyeong-jeong and Ahn Do-geol, which would require listed companies with a price-to-book ratio below 1 for two consecutive years to disclose value-up plans. Ahn's bill adds a condition limiting the rule to companies with a three-year average return on equity below 0.8, easing concerns that it could sweep in too many firms.
Experts who joined the discussion said they agreed with the bill's purpose, noting that it would hold management accountable for low share prices and create a system to track market distortions. They also said it could help normalize taxation by preventing artificial reductions in inheritance and gift taxes.
The Korea Exchange, the Financial Services Commission (FSC), and the Ministry of Economy and Finance also said they understood the purpose and necessity of the bills. However, they said many issues still need to be resolved before a practical system can be put in place. The Korea Exchange warned against applying value-up disclosure requirements uniformly. The FSC said the goal should go beyond simply making disclosures mandatory and should focus on improving the quality of the disclosures themselves. It also noted that if a system is to be built around PBR, which is highly volatile, it must be designed with greater precision.
The Ministry of Economy and Finance expressed concern that the amendment to the Inheritance and Gift Tax Act, which would set an 80% floor for valuing listed shares like unlisted ones, could violate the principle of market-price taxation and negatively affect international credibility. It also pointed out that valuing companies' net assets would be practically difficult if the number of invested entities, such as holding companies, subsidiaries, and grand subsidiaries, becomes too large.
The People Power Party also held a forum at the National Assembly on the same day titled, 'Is Our Stock Market Okay as It Is? Roller-Coaster Samsung Electronics and SK hynix Leveraged ETFs.' The party identified single-stock leveraged ETFs linked to Samsung Electronics and SK hynix as a major reason for the KOSPI's recent swings. Calls to delist those products followed.
People Power Party lawmaker Lee Jong-wook said, "This incident involving single-stock leveraged ETFs is a clear policy failure by the government, with Cheong Wa Dae deeply involved. Yet the government has offered no apology and continues to make irresponsible excuses." He added, "The only real solution is to effectively drive this product out of the market." His remarks amounted to a call for delisting. Experts at the forum also mentioned a kind of 'fade-out' strategy to push the ETFs toward delisting, including reducing the current 2x leverage to 1.1x and raising the base deposit to 100 million won to make entry more difficult. Suspending sales was also proposed.
[email protected] Kim Hyeong-gu Lee Hae-ram Reporter