South Korean Finance Minister Koo Yun-cheol said Tuesday that he would work to reach a trade agreement with the United States that benefits both countries.
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South Korea’s finance minister issued an apology Wednesday after retail investors suffered steep losses on leveraged stock wagers, following regulatory changes introduced earlier this year.
Since single-stock leveraged exchange-traded funds were introduced on May 27, Korean retail investors have poured a net 14 trillion won, or about $9.7 billion, into the products, according to KB Financial Group. Foreign investors, by comparison, bought roughly 2 trillion won.
The rush into high-risk trading helped power one of the world’s strongest stock market rallies. But it has now left many individual investors facing sizable losses after South Korea’s Kospi index entered a sharp pullback, driven largely by weakness in semiconductor shares.
The losses have been particularly severe for investors holding single-stock leveraged ETFs linked to chip heavyweights Samsung Electronics and SK Hynix, both of which had climbed sharply during the AI-fueled semiconductor boom.
The KODEX SK Hynix Single Stock Leverage ETF — built to deliver twice the daily performance of SK Hynix shares — has dropped more than 80% from its June 23 high, LSEG data showed.
A comparable leveraged ETF tied to Samsung has declined nearly 75% since reaching its peak on June 3.
It comes after a blistering rally in the Kospi has come to an abrupt halt, with jitters over chip stocks seeing the value of the index plunging almost 35% over the last month.
The Kospi’s fortunes have reversed in recent weeks as investor jitters have rattled the index’s largest constituents
South Korea’s finance minister Koo Yun-cheol accepted lawmakers’ demand for an apology in a parliamentary session on Wednesday after single-stock leveraged ETFs were introduced without careful consideration, according to Reuters.
The country’s Financial Services Commission Lee Eog-weon also said on Wednesday that the regulator is considering cutting off access to the products to all but professional investors.
Lee told the National Assembly’s Political Affairs Committee in Seoul that “if necessary, there is a way to raise [the investment requirements] up to professional investors,” according to the Seoul Economic Daily.
He added that regulators could lower the leverage multiple of single-stock leverage products if the necessary legislation is prepared by lawmakers.
Lee said: “Since [the tracking multiple of] two times is too large, lowering it would likely have an effect in terms of easing volatility.” He added, “We will look into how to take investors into account, such as through beneficiary general meetings, together during the process of considering the bill.”
— CNBC’s Lee Ying Shan and Blair Baek helped contribute to this report.
