Financial Services Commission (FSC) Chairman Lee Eok-won acknowledged that single-stock leveraged exchange-traded funds (ETFs) contributed to increased volatility in the Korean stock market. During a National Assembly Policy Committee business report session on the morning of the 29th, Lee stated that single-stock leveraged products expanded market volatility through rebalancing and other processes, responding to questioning by Democratic Party lawmaker Kim Yong-man. The acknowledgment comes amid concerns over heightened fluctuations in domestic equities following the introduction of these investment products.
FSC Chairman Confirms Single-Stock Leveraged ETFs Increased Market Volatility
Lee Eok-won told the National Assembly Policy Committee that "single-stock leveraged products also expanded market volatility through rebalancing and various other processes." The statement came in response to lawmaker Kim Yong-man's question noting that the Korean volatility index rose to near 98 by the end of June, approximately one month after the product launch. Kim asked whether it was reasonable to conclude that the volatility increase was caused by single-stock leveraged ETFs, to which Lee provided his affirmative assessment.
The FSC chairman emphasized that single-stock leveraged ETFs were not the sole cause of recent market volatility. Lee identified global semiconductor industry uncertainty and excessive concentration in Samsung Electronics and SK Hynix as primary contributing factors.
Semiconductor Concentration and Global Uncertainty Cited as Additional Factors
Lee explained that "whenever news comes out about whether AI investment is sustainable or to what extent China's catch-up has materialized, expectations and concerns alternate, causing significant fluctuations in the global semiconductor industry outlook." He added that "looking at our capital market, the concentration of Samsung Electronics and Hynix in the stock market has intensified significantly, so the impact of semiconductor industry shocks on us is very large."
The chairman's testimony highlighted the structural vulnerability of the Korean stock market to semiconductor sector movements due to the heavy weighting of these two companies in major indices.
FSC Announces Regulatory Response Timeline and Investor Protection Measures
Addressing criticism about delayed regulatory action, Lee stated that "our authorities have continuously monitored market impact since the May 27 launch." He explained that the FSC consulted with relevant ministries and industry experts before initiating institutional improvements. The regulatory measures were announced on July 16 after consultations with expert groups.
Regarding investor protection mechanisms, Lee acknowledged the seriousness of the situation, stating "we think very seriously about the fact that this situation has occurred." He committed to strengthening protections through supplementary measures.
FAQ
What did FSC Chairman Lee Eok-won acknowledge about single-stock leveraged ETFs?
Lee Eok-won acknowledged that single-stock leveraged ETFs contributed to increased volatility in the Korean stock market through rebalancing and other processes. He made this statement during a National Assembly Policy Committee business report session on the morning of the 29th in response to questioning by Democratic Party lawmaker Kim Yong-man.
When did the FSC announce regulatory measures for single-stock leveraged ETFs?
The FSC announced regulatory measures on July 16 after the products launched on May 27. Lee Eok-won stated that authorities continuously monitored market impact following the launch, consulted with relevant ministries and industry experts, and held discussions with expert groups before announcing the measures.
