South Korea expedites stricter deposit rules for leveraged stock products after presidential directive

South Korea's financial authorities are hastening the implementation of stricter basic deposit requirements for single-stock leveraged products. This accelerated timeline stems directly from President Lee Jae-myung's directive during a State Council meeting on July 21. He urged the authorities to "swiftly and faithfully" develop supplementary measures, expressing concern that the original plan was taking too long.

The move targets leveraged Exchange Traded Funds (ETFs) that track individual stocks, aiming to stabilize the market. If the market does not stabilize following these initial measures, the government is prepared to introduce further actions. This indicates a proactive stance in managing potential risks associated with volatile leveraged investments.

The impact of market volatility is already evident, particularly for products linked to SK Hynix. According to the Korea Exchange, leveraged ETFs based on SK Hynix have seen declines of approximately 70% from their highest points. Specifically, the 'KODEX SK Hynix Single Stock Leverage' ETF closed at 13,015 won on July 24, a 16.25% drop from the previous trading day. This ETF had previously reached a high of 44,000 won on May 22, highlighting a significant loss for investors.

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It seems to be taking too long. Supplementary measures must be made swiftly and faithfully.