Lead

South Korea's top financial regulator has acknowledged the role of single-stock leveraged exchange-traded funds (ETFs) in recent extreme market swings and announced that additional measures are being reviewed to cool demand for the products. Financial Services Commission (FSC) Chairman Lee Eog-weon expressed regret over the volatility and said authorities take responsibility for the turmoil.

Coverage Comparison

All reporting on this story comes from Yonhap News Agency, which covered the regulator's statements and actions across several articles. The coverage details the FSC's initial response, including an increase in minimum cash deposits for single-stock leveraged ETF investments, and signals that further steps are planned. Yonhap also reported on an emergency market inspection meeting and the FSC's intention to revise the Capital Markets Act to strengthen its ability to stabilize markets.

Key Claims

Regulator's Apology and Responsibility

During a session at the National Assembly on Wednesday, Lee Eog-weon said, "I regret failing to fully meet the public's expectations," and added, "I take the sharp rise in market volatility very seriously." Yonhap reported this marked the first time an FSC chairman apologized in public over the controversy surrounding single-stock leveraged ETFs. Lee also stated, "As the agency is ultimately responsible for the financial market, we recognize our heavy responsibility."

Market Volatility and ETF Role

Yonhap reported that single-stock leveraged ETFs have been cited as one of the factors rocking the local stock market. Seoul shares plunged by nearly 6 percent on Wednesday, following a nearly 11 percent crash the previous session, as investors dumped semiconductor stocks amid skepticism over AI-related spending. The benchmark KOSPI index, which topped 9,000 points in June, tumbled to 5,593.56 points by Thursday, according to Yonhap.

Measures to Cool ETF Demand

Earlier, the FSC unveiled measures including a hike in the minimum cash deposit for single-stock leveraged ETF investment, effective Friday. The government moved up the implementation of the deposit requirement by several weeks to help stabilize the market and protect investors. Lee said, "The measures will be swiftly implemented to stabilize the market, and additional measures will be reviewed depending on the market situation."

Among possible options, Lee proposed a total volume management measure that would cap investment in such ETFs at 20 percent or less of an individual's total financial investment portfolio. The FSC is also considering a further hike in the minimum deposit.

Emergency Meeting and Legal Revisions

Following an emergency market inspection meeting held Wednesday night with other related agencies, the FSC announced plans to carry out additional measures "as early as possible." The FSC plans to prepare legal grounds to activate market stabilization measures by revising the Capital Markets Act with the Financial Supervisory Service (FSS). Additionally, the FSC will have brokerages set limits on the maximum amount of investment into single-stock leveraged ETFs, aiming to prevent investors from taking excessive risks.

Background

Single-stock ETFs were launched in the local market on May 27. The recent market turmoil has been exacerbated by concerns over massive spending on artificial intelligence, which has hit the share prices of major chipmakers Samsung Electronics and SK hynix, as reported by Yonhap.