South Korea may cap leveraged ETF investments for retail investors, media reports say

South Korea's top financial regulator is contemplating a cap on investments in single-stock leveraged exchange-traded funds (ETFs) for retail investors, according to recent media reports. Lee Eog-weon, chairman of the Financial Services Commission, indicated during a meeting with local brokerages and asset managers that the regulator would review and potentially implement additional measures to curb demand for these high-risk products.

One such measure under consideration is a cap on the total investment value for each individual investor. This follows a recent move by the Korean regulator to increase the cash deposit required for retail investors looking to invest in these ETFs. These products are often tied to the performance of the country's two largest stocks: Samsung Electronics and SK Hynix, both prominent semiconductor manufacturers.

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authorities would consider a cap on single-stock leveraged exchange-traded funds (ETF) investments for retail investors if needed

The potential regulatory action coincides with a sharp decline in the stock prices of these tech giants. Shares of Samsung Electronics plummeted as much as 9.7% in Seoul on Tuesday. Concerns over potential market share loss to Chinese competitor CXMT and financing risks associated with AI infrastructure spending are cited as reasons for the downturn. Peer SK Hynix also saw its stock slump significantly, falling as much as 11.2% in Seoul. Its American Depositary Receipts (ADRs) dropped 10% on Nasdaq on Monday, falling below their initial public offering price.

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the regulator would review and prepare additional measures to curb the demand for the ETF products, such as putting a cap on total value of investments for each individual.