Financial Authorities to Cap Individual Investment in Leveraged Products Amid Market Volatility

South Korean financial authorities are set to introduce individual investment limits on single-stock leveraged products, a move aimed at curbing market volatility. The decision comes in response to recent sharp declines in the stock market, especially within the semiconductor industry, which have been exacerbated by factors such as intensified competition from China and funding concerns surrounding major U.S. tech companies.

As a proposed measure, individuals will be limited to investing no more than 20% of their total investment capital in single-stock leveraged products. This initiative is part of a broader strategy to stabilize the market, which has experienced significant fluctuations. The authorities are also considering increasing the basic deposit requirement and implementing measures to curb excessive trading orders, such as raising transaction cost burdens.

Officials, including Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, convened an emergency market situation review meeting. Participants assessed domestic and international financial market trends and discussed response strategies. They acknowledged that while the recent market downturn represents a correction after a period of rapid stock price increases, the underlying economic fundamentals of South Korea remain robust. Indicators such as strong exports in key sectors like semiconductors, upward revisions in corporate earnings forecasts, and an expanding current account surplus support this view.

Despite the positive economic outlook, authorities stressed the need to manage excessive market anxiety. Recognizing the heightened volatility in the Korean stock market compared to other nations and historical periods, they committed to maintaining a 24-hour monitoring system and conducting thorough analyses of factors amplifying market swings. The government plans to implement the basic deposit requirement hike on July 31 and immediately pursue additional measures like the individual investment limits to ensure market stability.

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The government plans to set individual investment limits on single-stock leveraged products to manage investment size.