South Korea's Top Financial Regulator to Discuss Leveraged ETF Risks with CEOs

Lee Chan-jin, the head of South Korea's Financial Supervisory Service (FSS), is set to convene a meeting with chief executive officers of asset management firms to discuss the growing concerns surrounding single-stock leveraged Exchange Traded Funds (ETFs). The discussion comes amid heightened market volatility, with these specific ETFs being identified as a significant contributing factor.

The meeting, scheduled for July 13, is intended to examine various aspects of asset management, including the procedures and rationale behind voting rights exercises. However, the primary focus is expected to be the volatility and potential speculative nature of single-stock leveraged ETFs, which have drawn considerable attention from regulators.

Lee has previously expressed strong reservations about these products, stating that while introduced to prevent capital outflow, they have yielded few positive results and generated considerable side effects. He even lamented that measures should have been taken earlier to curb their impact, signaling the regulator's intent to implement corrective actions.

Since their launch on May 27, ETFs tracking Samsung Electronics and SK Hynix on a leveraged basis have attracted substantial investment from retail investors. This influx has been linked to increased market fluctuations and a concentration of trading in large-cap stocks. Data shows that leveraged ETFs accounted for 33.7% of total ETF trading volume as of July 1. Financial authorities are reportedly exploring various options to mitigate these effects, including potentially raising minimum deposit requirements for leveraged ETF investments or enhancing investor education programs.

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Overseas national wealth outflow to prevent introduced product, but effect is little and only side effects were created. Should have blocked it even if lying down, regret.