Item 1 of 2 Currency dealers work as an electronic board displays the Korea Composite Stock Price Index (KOSPI), the exchange rate between the U.S. dollar and South Korean won at the dealing room of a bank, in Seoul, South Korea, July 14, 2026. REUTERS\/Kim Soo-hyeon\/File Photo<\/p>\n
[1\/2]Currency dealers work as an electronic board displays the Korea Composite Stock Price Index (KOSPI), the exchange rate between the U.S. dollar and South Korean won at the dealing room of a bank, in… Purchase Licensing Rights, opens new tab<\/a> Read moreKOSPI steadies after slump, heads for largest-ever monthly dropS.Korea raises bar for buying and trading single stock ETFsProtesters push regulators for more reform on access to leverage<\/p>\n SEOUL, July 30 (Reuters) – South Korea’s efforts to rein in the leveraged products wreaking havoc \u200bin its financial markets may not go far enough to quell skyrocketing volatility, analysts say, as pain and public anger mount over a $2 trillion-and-counting stocks wipeout.<\/p>\n As \u200cthe hottest trade in the world has hit reverse<\/a>, with the country’s stock market down about 40% in a month, it is local investors \u2014 young people, pensioners and mums and dads \u2014 who borrowed money and piled in late who are hurting most of all.<\/p>\n Sign up here.<\/a><\/p>\n That has turned up the heat on a government that cheered on the rising market and has been under pressure as it has fallen, with some investors placing condolence flowers outside \u200bthe country’s parliament building in protest.<\/p>\n Amid diving markets on Wednesday, the Bank of Korea governor and the heads of financial regulators met in the evening to discuss ways to stem the \u200bpain.<\/p>\n After the meeting, regulators said they would put caps on individual investment<\/a> into single-stock leveraged funds<\/a> and raise the trading costs for those ETFs, which \u2060have had an outsized role in the rally and the reckoning, turning the market’s biggest stocks into rollercoaster rides.But market participants say the rules do not target the scale of the \u200bETFs’ leverage, as regulators<\/a> in Hong Kong have this month, and that it will be tricky to dampen their influence so long as there are buyers who want to get rich quick.<\/p>\n “The measures \u200bwill help ease volatility in the Korean stock market, but introducing a liquidity put, such as a market stabilisation fund, would have a greater effect,” said Kim Jin-wook, an economist at Citi Korea.<\/p>\n Another analyst, the head of research at a brokerage in Seoul, speaking anonymously due to the sensitivity around the topic in South Korea, said the latest regulatory measures were unlikely to work as the cap was hastily announced without putting \u200bproper thought into it.<\/p>\n The analyst said Hong Kong’s rules reduced forced selling during market stress, helping to lower volatility.<\/p>\n However, the ETF investment cap in South Korea will not help existing investors \u200bwho will not be required to sell holdings, and price swings are likely to stay as the Korean rules will not affect similar leveraged products listed in New York and Hong Kong, he said.<\/p>\n ‘SLAUGHTERING RETAIL \u200cINVESTORS’<\/p>\n As markets \u2060cratered this week, the sidewalk outside the National Assembly building in Seoul was covered with about 40 wreaths of condolence flowers laid in protest against the government’s handling of the single-stock leveraged funds.<\/p>\n One ribbon on a white wreath read “Slaughtering retail investors”. “Wait ’til pay back time, I will repay next time I vote,” read another.<\/p>\n Inside the Assembly, on Wednesday, South Korea’s Finance Minister Koo Yun-cheol came under pressure from opposition lawmakers and said he was sorry<\/a> for introducing the leveraged products without careful consideration.<\/p>\n The backlash has spread to online communities generally sympathetic to President Lee Jae Myung’s administration and calls \u200bfor tighter regulation have also emerged within \u200bthe ruling Democratic Party.<\/p>\n Democratic Party leadership candidate \u2060Jung Chung-rae suggested on Wednesday a temporary suspension of trading in single-stock leveraged ETFs, saying extraordinary measures were needed after sharp market swings pushed the KOSPI below 6,000.<\/p>\n The benchmark (.KS11), opens new tab<\/a> on Thursday seemed to stabilise after two straight sessions of heavy losses, though it still fell 1% and is far from arresting a \u200bdowntrend that has erased $2 trillion in value from the KOSPI since June’s record high.The market is headed for its largest ever monthly \u200bfall \u2014 and that is despite \u2060enormous earnings at top chipmakers Samsung Electronics<\/a> (005930.KS), opens new tab<\/a> and SK Hynix<\/a> (000660.KS), opens new tab<\/a>, which between them this week reported 150 trillion won ($100 billion) in quarterly profit.<\/p>\n Volume has been notably light suggesting plenty of investors are hanging on in hope of rebound, though data shows foreigners sold a net 18.5 trillion won ($13 billion) worth of stock in July.<\/p>\n “We were overweight South Korea until Friday,” said Tom Graff, chief investment officer at Facet in \u2060Phoenix, Maryland, \u200bowing to volatility.<\/p>\n “I do think the crash has a logical limit to how far it drops. But I don’t \u200bwant to try to catch the falling knife.”<\/p>\n ($1 = 1,435.2000 won)<\/p>\n Additional reporting by Dahyun Lee, Joyce Lee and Jihoon Lee in Seoul and by Laura Matthews in New York; Writing by Tom Westbrook; Editing by Christian Schmollinger<\/p>\n Our Standards: The Thomson Reuters Trust Principles., opens new tab<\/a><\/p>\n