Kim Yong-beom, the Blue House policy chief, drew a clear line on July 19 against calls to delist single-stock leveraged exchange-traded funds (ETFs) based on Samsung Electronics (005930) and SK Hynix (000660), saying such a move is “difficult to imagine.” His reasoning: with a market already exceeding 10 trillion won (approximately $6.7 billion), the act of delisting itself could trigger another market shock.<\/p>\n
Appearing on KBS’s “Sunday Diagnosis Live,” Kim stated, “Investors have already committed capital, and the product scale has surpassed 10 trillion won. If we were to delist, wouldn’t that itself deliver a tremendous shock to the market, and wouldn’t we then have to absorb all that selling pressure?”<\/p>\n
Since their launch on May 27, the single-stock leveraged ETFs for Samsung Electronics and SK Hynix have been identified as primary culprits amplifying stock market volatility, as the two stocks repeatedly experienced wild price swings. In particular, when a “wag the dog” phenomenon emerged\u2014where futures began shaking the spot market\u2014President Lee Jae-myung directly ordered the swift preparation of supplementary measures during a Blue House briefing on July 15. South Korea’s financial authorities responded with a countermeasure package just one day later, on July 16.<\/p>\n
Under the authorities’ plan, starting next month, investors trading single-stock leveraged ETFs must hold at least 30 million won (approximately $20,169) in pure cash in their accounts. Beginning in November, the minimum trading unit will be drastically expanded from 1 share to 20 shares. Kim offered a positive assessment of the measures, saying, “The authorities engaged in extensive discussion and crafted measures that substantially accommodate the issues raised in the market. Once implemented, many of the problems that have been pointed out will be largely resolved.”<\/p>\n
However, Kim identified the tracking error\u2014the gap between an ETF product’s net asset value (NAV) and its market price\u2014as a core challenge. “We must minimize the tracking error,” he said, adding that “we can further discuss ways to appropriately manage the selling pressure required to align the tracking error.” Specifically, he posed questions such as, “Must the tracking error management cycle be strictly within 30-minute intervals, or could it be broadened to around two hours?” and “Must it be managed by selling physical shares, or is there no way to manage it appropriately using other derivatives?”<\/p>\n
Kim emphasized that “leveraged ETF products have the characteristic of doubling their impact during downturns,” and stressed that “authorities, asset management firms, and securities companies must engage in further discussion to minimize market shocks.” He also noted the heightened volatility just before market close, adding that “we need to consider various methods to minimize the shock these products deliver to the market at specific times and periods,” hinting at the possibility of additional supplementary measures.<\/p>\n
During the broadcast, Kim also devoted considerable time to current real estate market issues. Addressing the recent “triple surge” phenomenon\u2014where sale prices, jeonse (lump-sum deposit leases), and monthly rents are all rising simultaneously\u2014he said, “I am truly sorry to so many citizens,” adding, “Real estate supply and demand and various other conditions are far from favorable, and I take this very seriously.”<\/p>\n
Explaining the background of his remark at a Kwanhun Club forum last month that “we just need to shut up and build,” Kim said, “Since supply is not something that can be conjured up in a short period, I meant that we must desperately seek solutions by mobilizing all available methods, including non-apartment purchase-lease programs.” He specifically mentioned private officetel supply, converting commercial land in third-generation new towns to residential use, and utilizing areas dense with old industrial complexes such as Seoul’s Yeongdeungpo and Guro districts, stressing that “we will mobilize all supply volumes that can produce short-term effects.”<\/p>\n
On redevelopment and reconstruction, however, he took a cautious stance, calling them “not a silver bullet.” He pointed out that “while we can shorten procedures and appropriately discuss floor area ratios, redevelopment and reconstruction take a minimum of three to five years,” making it difficult to expect short-term supply effects. Regarding housing supply utilizing Seoul’s semi-industrial zones, he said, “This is not just a problem for the Seoul Metropolitan Government; collaborating with the central government could yield far greater results,” and disclosed that he had arranged a separate meeting with Seoul Mayor Oh Se-hoon.<\/p>\n
As a principle for real estate tax reform, Kim stated, “We will treat multiple homeowners and single homeowners differently, and apply differential treatment based on actual residency versus non-residency.” He explained that a certain judgment has been reached that even a single home for actual residence should be treated differently if it is an ultra-high-priced property, though the issue of setting appropriate standards and levels remains. On the argument for lowering capital gains taxes when raising property holding taxes, he showed a cautious attitude, saying, “We are considering such aspects,” but added that “it is difficult to speak uniformly.”<\/p>\n
Meanwhile, the scale of losses in single-stock leveraged products has already reached severe levels. According to an analysis of Korea Exchange data by The Financial News, Samsung Electronics fell 29.8% from a high of 362,500 won (approximately $244) on June 18 to a low of 254,500 won (approximately $171) on July 13, while SK Hynix plunged 36.9% from 2.92 million won (approximately $1,962) on June 22 to 1.84 million won (approximately $1,238) on July 16. The 14 single-stock leveraged ETFs and ETNs that track these stocks at double leverage posted an average decline of 47.1% over the past month, with all 14 products suffering drops exceeding 45%.<\/p>\n
Industry voices have criticized that investor losses are mounting as the implementation of regulatory measures is delayed. Byun Je-ho, Director of the Capital Markets Bureau at South Korea’s Financial Services Commission, explained that time is needed for securities firms’ computer system overhauls and testing. However, a securities industry insider countered, “Before waiting for system development, they should have first introduced immediately enforceable measures, such as temporarily restricting new purchases for a certain period or setting interim order limits.”<\/p>\n
Lee Jae-won, an analyst at Yuanta Securities, diagnosed that “expectations for the leveraged ETF measures’ release also failed to act as a trigger for a market rebound,” adding that “volatility stemming from leveraged ETFs and the absence of net buying entities have driven the index’s valuation to plummet below levels seen during the financial crisis.”<\/p>\n","protected":false},"excerpt":{"rendered":"Kim Yong-beom, the Blue House policy chief, drew a clear line on July 19 against calls to delist…\n","protected":false},"author":2,"featured_media":91041,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[40494,47864,11140,2497,146,276,16719,241,275,39469,24837],"class_list":["post-91040","post","type-post","status-publish","format-standard","has-post-thumbnail","category-sk-hynix","tag-base-deposit-requirement","tag-blue-house-policy-chief","tag-delisting","tag-kim-yong-beom","tag-lee-jae-myung","tag-samsung-electronics","tag-single-stock-leveraged-etf","tag-sk","tag-sk-hynix","tag-south-koreas-financial-services-commission","tag-tracking-error"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/91040","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=91040"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/91040\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/91041"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=91040"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=91040"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=91040"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}