[Anchor]
Following today's (July 28) plunge, the prices of single-stock leverage products for Samsung Electronics and SK Hynix fell by more than half just two months after their listing. Not only are investors facing massive losses, but these products are also being pointed to as the main culprits driving up overall market volatility. Financial authorities, who have moved up supplementary measures by three days, are even mentioning additional regulations.
Here is a report by reporter Kim Hye-min.
[Reporter]
The 1Q SK Hynix 2x Leverage ETF product, which was listed at around 22,000 won on May 27, dropped to 8,625 won today.
That is a 61% plunge in two months.
Other 2x leverage products have also plummeted by 55% to 59%, with all 14 products failing to reach even half of their prices on their first day of listing.
Under a structure that tracks twice the daily return, extreme market fluctuations have repeatedly occurred, accumulating the so-called "negative compounding effect."
These products have faced criticism for amplifying volatility during the rebalancing process, where asset managers additionally trade underlying stocks to match the double fluctuation rate.
Since the listing of 2x leverage ETF products, sidecars and circuit breakers for selling and buying have been triggered a total of 47 times up until today, already matching the number of triggers during the entire one-year period of the 2008 global financial crisis.
Reuters described that the stock market has "turned into a wild casino," while the Nihon Keizai Shimbun pointed out that South Korea's single-stock leverage is even shaking the Japanese stock market.
[Kim Sang-bong / Professor of Economics, Hansung University: If the market were mature, it would be normal for (leverage) ETF products not to have a major impact. It seems (government regulations) came out weak. There will be an effect, but that effect may be somewhat limited.]
In response, the Financial Services Commission stated, "If demand does not sufficiently subside despite the supplementary measures for single-stock leverage ETFs, we will consider additional actions."
Measures such as total volume management to limit the proportion of single-stock leverage within individuals' total investment in financial investment products to under 20% have been mentioned.
The FSC, which decided to early implement the raising of the investment deposit to 30 million won on the 31st, also plans to sequentially introduce tightened preliminary education evaluations, an additional hour of education, and strengthened management of discrepancy rates.
(Photo courtesy of Yonhap News / Video reporting: Lee Moo-jin, Video editing: Won Hyung-hee, Design: Kang Yoon-jung)
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