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🇰🇷 South Korea /Economy & Trade

Lee orders swift overhaul of leveraged stock product policies

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • President Lee Jae-myung ordered a swift and thorough revision of policies regarding leveraged products tied to single stocks like Samsung Electronics and SK Hynix.
  • The government introduced these products in May to boost the stock market and stabilize foreign exchange, but they have been criticized for increasing stock price volatility.
  • Lee emphasized that while the government aims for policy effects, it must also address market participants' concerns about losses and ensure necessary measures are taken decisively.

President Lee Jae-myung has called for a rapid and comprehensive overhaul of policies concerning leveraged financial products linked to single stocks, specifically mentioning Samsung Electronics and SK Hynix. He stated that while participants might see policy inefficiencies, the supplementary measures must be developed quickly and thoroughly.

In the eyes of participants, the policy inefficiencies are much greater, so the supplementary measures must be made swiftly and thoroughly.

— President Lee Jae-myungResponding to criticism that leveraged products tied to single stocks like Samsung Electronics and SK Hynix increase stock market volatility.

Lee made these remarks during a State Council meeting, noting that although the products were intended to stabilize the exchange rate, the public should not have to consider such complexities. He pointed out the criticism that these leveraged products, designed to absorb overseas investment demand into the domestic stock market, have exacerbated stock price fluctuations, leading to sharp declines.

While the aim was to achieve policy effects in terms of exchange rate stabilization, the public does not have to consider such things.

— President Lee Jae-myungCommenting on the purpose and public perception of the leveraged products.

The Financial Services Commission had previously announced measures on July 16 to increase the minimum deposit for single-stock leveraged ETFs and ETNs from 10 million to 30 million won, and to only recognize cash for calculating this deposit. However, President Lee questioned the sufficiency of these measures, especially given the delayed implementation.

There is criticism that this has exacerbated a kind of adjustment due to the sharp rise in stock prices, and some sharp declines.

— President Lee Jae-myungPointing out the negative impact of the leveraged products on stock price volatility.

Lee urged policymakers to act decisively and swiftly, acknowledging that while perfect policy execution is difficult, market participants felt they had already anticipated these issues and suffered losses. He stressed that creating complementary measures is the government's responsibility. Presidential chief of staff Kim Yong-beom also highlighted the products' success in curbing overseas capital outflow, citing a significant reduction in individual overseas stock investments in the first half of the year compared to the previous year.

But there are concerns that that alone won't be enough. And that the implementation itself is not immediate, but will take quite some time?

— President Lee Jae-myungQuestioning the effectiveness and timing of the proposed supplementary measures.
DistantNews Editorial

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

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