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Lawmaker urges delisting of leveraged ETFs, calls KOSPI a 'casino'
🇰🇷 South Korea /Elections & Politics

Lawmaker urges delisting of leveraged ETFs, calls KOSPI a 'casino'

From Dong-A Ilbo · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • A lawmaker is urging the financial authorities to consider delisting leveraged ETFs tied to Samsung Electronics and SK Hynix.
  • The lawmaker claims these ETFs are amplifying market volatility and turning the KOSPI into a "casino."
  • The politician also called for the dismissal of the Financial Services Commission chairman and the Financial Supervisory Service governor.

A lawmaker has called for a review of the delisting of leveraged exchange-traded funds (ETFs) that track single stocks of Samsung Electronics and SK Hynix. Ahn Cheol-soo, a member of the People Power Party, stated on Friday that the KOSPI has devolved into a "casino" due to the massive funds concentrated in these leveraged ETFs, which he claims are amplifying stock price volatility.

The KOSPI has turned into a casino due to the 212 trillion won in funds concentrated in Samseonix leveraged ETFs, amplifying stock price volatility.

— Ahn Cheol-sooDescribing the impact of leveraged ETFs on the South Korean stock market.

Ahn pointed out that the daily rebalancing and arbitrage trading are causing market instability, with the KOSPI fear index soaring to a record high of 90.8. He argued that the initial goals of attracting foreign investment and defending the exchange rate have been largely unmet. Only 500 billion won out of 11 trillion won invested in similar leveraged products in Hong Kong has flowed into South Korea, while the exchange rate has surpassed 1,550 won per dollar.

Samseonix leverage has been a complete policy failure, consuming trillions of won daily and eroding corporate value and public assets.

— Ahn Cheol-sooCriticizing the performance and impact of leveraged ETFs.

The lawmaker also highlighted the negative compounding effect of these leveraged products, which is causing investors' assets to evaporate. All 14 single-stock leveraged ETFs launched have shown negative returns over the past month, with some incurring losses of up to 35.9%. Ahn declared these leveraged products a policy failure, consuming trillions of won daily and eroding corporate value and public assets. He stressed the need for strong corrective measures, including delisting, to normalize the stock market.

We need strong corrective measures, including delisting, to normalize the stock market.

— Ahn Cheol-sooProposing solutions to address market volatility.

As an alternative, Ahn proposed prohibiting single-stock leveraged ETFs and easing regulations on active ETFs with a correlation coefficient of 0.7. He also demanded the dismissal of the Financial Services Commission chairman and the Financial Supervisory Service governor, holding them responsible for the current situation. Ahn criticized their lack of foresight, response, and preparedness, questioning why President Lee is merely observing their inaction.

Why is President Lee merely watching as these irresponsible public officials cling to their positions?

— Ahn Cheol-sooQuestioning the inaction of government officials.
DistantNews Editorial

Originally published by Dong-A Ilbo in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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