South Korea hesitant to delist leveraged ETFs tracking Samsung, SK Hynix due to market shock fears

South Korea's Presidential Office has signaled reluctance to delist single-stock leveraged Exchange Traded Funds (ETFs) that track Samsung Electronics and SK Hynix, despite concerns they may be excessively amplifying market volatility. The office believes such a move could send significant shockwaves through the financial markets.

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Delisting itself could cause enormous shock to the market; it's hard to imagine.

Kim Yong-beom, the chief policy secretary, stated that delisting these ETFs would be difficult and could cause unimaginable disruption. He suggested that recently implemented regulations would address many of the existing issues. However, he also indicated openness to discussing various methods to optimize the burden of selling to match the gap between market price and net asset value at specific times.

These comments come after the government announced supplementary measures on July 16th to manage market volatility. These measures include raising the minimum deposit requirement for leveraged ETF investors to 30 million won and stipulating that deposits must be made in cash, not stocks. Despite these steps, some critics argue that further action is needed to stabilize the market.

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Many of the problems that have been pointed out will be resolved to a considerable extent once the revised system is implemented.

In a separate discussion on housing policy, Kim Yong-beom expressed skepticism about relying solely on redevelopment and reconstruction initiatives, as advocated by Seoul Mayor Oh Se-hoon, to boost housing supply. He argued that such approaches could, in the short term, actually reduce supply. Furthermore, he hinted at the possibility of differentiated property taxes for ultra-high-priced homes, suggesting that even single-home owners of exceptionally expensive properties might face different tax treatment compared to owners of standard residences.

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It is not a silver bullet.