Chung Proposes Halting Leveraged ETF Trading; Song, Kim Urge Caution

Chung Cheong-rae, a candidate for the leadership of South Korea's Democratic Party, has proposed a temporary halt to trading in single-stock leveraged exchange-traded funds (ETFs). Chung argued that these financial products are contributing to the recent sharp declines in the KOSPI index. His proposal came during a televised debate for the party's leadership race, held on Tuesday in Sangam MBC, Mapo-gu, Seoul.

However, other prominent candidates for the party leadership, Song Young-gil and Kim Min-seok, expressed reservations about Chung's suggestion. They advocated for a more cautious approach, indicating that a swift decision on such a measure might not be advisable. The differing views highlight a potential division within the party regarding how to address market instability and the role of complex financial instruments.

The debate underscores the growing concern among South Korean policymakers and investors about the impact of leveraged ETFs on market volatility. These instruments, which amplify daily returns of an underlying index, can lead to significant losses for investors and exacerbate market swings, especially during periods of heightened uncertainty. Chung's proposal suggests a willingness to intervene directly in the market to mitigate perceived risks, while his rivals' caution reflects a concern about unintended consequences or overregulation.

“

Single-stock leveraged ETFs significantly increase volatility.