"Which Way Are We Supposed to Follow?"...Retail Investors Fume Over Stock-Market Policies That Loosen, Tighten and Delay Rules [Why the Stock Market?]

[Financial News] The government has decided to postpone by six months its plan to tighten delisting criteria, introduced to swiftly remove insolvent companies, as market conditions deteriorate. It has also added a series of restrictions to single-stock leveraged products, introduced to expand investors’ choices, just over two months after their listing. As authorities repeatedly tighten regulations or delay scheduled policies depending on market conditions while also calling for a more active stock market, controversy is growing over the predictability of capital-market policy.

According to the financial investment industry on the 6th, the government and Korea Exchange (KRX) have decided to postpone by six months the additional increase in the market-capitalization thresholds for delisting, which had been scheduled to take effect next January. The date for raising the KOSDAQ market-capitalization threshold from the current 20 billion won to 30 billion won will be pushed back from next January to July. For the KOSPI Composite Index, the date for raising the threshold from 30 billion won to 50 billion won will also be delayed by the same period.
The government explained that it had taken into account recent calls from businesses to supplement the system in light of worsening KOSDAQ market conditions. It also considered allowing companies that meet certain financial requirements to transfer their listings to KONEX without undergoing a liquidation trading period, as well as the need for a certain amount of time for the market to recover.
However, the roadmap was designed to bolster confidence in the domestic stock market through the swift removal of insolvent companies. Its revision once again in response to market conditions has inevitably fueled controversy over policy predictability.
In January last year, financial authorities decided to tighten delisting requirements to ensure the timely removal of underperforming companies. At the time, they presented a roadmap to raise the KOSPI Composite Index market-capitalization threshold from 5 billion won to 20 billion won in 2026, 30 billion won in 2027 and 50 billion won in 2028. For KOSDAQ, the threshold was to rise in stages from 4 billion won to 15 billion won, 20 billion won and 30 billion won, respectively. The plan was to raise the thresholds over three years to reduce the shock to the market.
Financial authorities subsequently moved up the schedule for tightening delisting criteria this year. The application of the 30 billion-won threshold for KOSDAQ was brought forward by one year, from January 2028 to January 2027. For the KOSPI Composite Index, the application of the 50 billion-won threshold was likewise moved up from January 2028 to January 2027. However, as stock-market volatility has recently increased, authorities have decided to delay the additional increases scheduled for next January by another six months.
Even before the decision to postpone the delisting thresholds, the securities industry had raised concerns about applying the stricter criteria unchanged to the current market. Eom Su-jin, a researcher at Hanwha Investment & Securities, said last month, "The intention to address the problem of declining market confidence caused by the accumulation of insolvent companies is positive." However, Eom added, "We also need to consider whether it is appropriate to immediately apply strict delisting standards to small- and mid-cap stocks when volatility and supply-demand imbalances are extreme."

A similar short-term shift in policy direction has also emerged in single-stock leveraged products.
Domestic single-stock leveraged products were first listed on May 27. The aim was to eliminate regulatory asymmetry between domestic and overseas exchange-traded funds (ETFs) and expand investors’ product choices. However, after Samsung Electronics and SK hynix shares surged and funds poured into related products, financial authorities moved to tighten regulations just over two months later.
Starting July 31, financial authorities raised the minimum deposit for individual retail investors in single-stock leveraged products from 10 million won to 30 million won in cash. They also decided not to recognize substitute securities, such as stocks, ETFs and bonds. Then, starting on the 19th of last month, new investors were required to complete simulated trading in addition to meeting the existing minimum-deposit and pre-training requirements.
The market contracted rapidly. The average daily trading value of 16 single-stock leveraged ETFs based on Samsung Electronics and SK hynix reached 11.6787 trillion won from their listing dates through July 30, immediately before the stricter regulations took effect. But from July 31, when the regulations began, through the 1st, it plunged 91.8% to 962.9 billion won.
Retail investors also reversed course. They had made more than 15 trillion won in net purchases of the related ETFs from their listing dates through July 30, but turned to net selling after the regulations were tightened.
An official in the securities industry noted, "There is clearly a need to strengthen investor-protection measures for high-risk products." However, the official added, "Given that regulations were significantly tightened immediately after the products were approved, it is necessary to look back and consider whether the possibility of overheating was sufficiently taken into account at the policy-design stage."

For investors, this means they repeatedly find themselves having to consider not only the market’s direction but also policy changes when making investment decisions.
The government has pursued policies to make domestic stocks more attractive and channel household funds into the capital market by improving corporate value, expanding shareholder returns and strengthening the capital market’s fundamentals.
However, critics say it has become difficult to discern a consistent direction in recent policy trends. Authorities expanded investment choices, then raised entry barriers when the market overheated. They also moved up the schedule for tightening standards to remove insolvent companies swiftly, only to delay it again when the stock market faltered.
Each measure has its own rationale. Regulations on leveraged products are intended to protect investors, while postponing the delisting thresholds is meant to reduce the unintended consequence of exposing companies uniformly to delisting risks during a sharp market decline.
The problem arises when the system changes every time the market moves. Investors must consider not only corporate earnings, interest rates, exchange rates and supply and demand, but also what regulations may be introduced and when policies already announced might be changed.
As overseas stocks have become a major investment destination for retail investors, the domestic stock market inevitably faces competition for their choices. That is why experts say securing confidence in the market through consistent policies is more important than short-term measures to boost stock prices.
An official at a securities firm said, "Creating an institutional environment that investors can trust over the long term is just as important as policies designed to channel funds into the domestic market." The official added, "If policy predictability declines, it could also hinder the inflow of funds into the domestic stock market."


[email protected] Choi Doo-sun Reporter