What did the Chairman of the Financial Supervisory Service of South Korea say? He deeply regrets introducing leveraged ETFs and believes he should have definitely laid down to stop it back then.
BlockBeats News, June 23rd - Financial Supervisory Service (FSS) of South Korea expressed regret for introducing Samsung Electronics and SK Hynix single-stock leveraged ETFs on the 22nd, admitting the policy's failure and revealing preparations for investor protection measures. Regarding South Korea's leveraged investment boom, Lee Chan-jin warned against the statistical illusion caused by the stock market's total market value growth, leading to a decrease in the proportion of credit trading balance to total market value and a perceived decrease in riskiness. Lee Chan-jin's full statements during the press conference are as follows:
Admits Failure of Single-Stock Leveraged ETF Policy, Describing It as "Very Regrettable"
Lee Chan-jin expressed clear regret for introducing Samsung Electronics and SK Hynix single-stock leveraged ETFs at the end of last year to address the high exchange rate, and raised strong concerns about overheated investment. The system was introduced at the end of last year to redirect retail investors' demand for "overseas stock investment" back to the domestic stock market in response to the prolonged high value of the South Korean won. Lee Chan-jin pointed out: "The product's extremely high turnover rate is causing a situation where only securities companies are benefiting. I am concerned that this may turn into a situation where those who skim the profits in the casino make big money, and I am personally very worried that true retail investors have not gained actual benefits, only the part where the management and operating systems profit. With a turnover rate close to 200% for this product, it is estimated that securities companies can earn transaction fees of up to 100 trillion Korean won. I am reflecting on whether I should have stopped it then by all means, and I am very regretful now."
Warns That Leveraged ETFs "Only Benefit Brokerages," Investor Protection Measures Being Considered
Lee Chan-jin expressed strong concerns about the high turnover rate of leveraged ETFs and warned that the current overheated situation has not eased. "Although the Financial Supervisory Service recently issued a consumer alert, the situation has not cooled down. Most investors belong to the middle class and ordinary people, and once the stock market fluctuates, it could have a huge impact on families, so we are considering additional safety measures." Regarding the specific direction of the measures, Lee Chan-jin stated: "We are studying solutions in credit-related aspects that can mitigate external shocks and will discuss with the authorities how to step by step deal with various measures from financing margins to credit."
Concerns About the Leveraged Investment Boom, Warning Against Statistical Illusions
Regarding the overall stock market and leveraged investment situation in South Korea, Lee Chan-jin pointed out that market instability and trading concentration phenomena are intensifying. "Trading turnover rates and other metrics have sharply increased, and market instability and volatility have significantly worsened. In particular, the trading concentration phenomenon, mainly in semiconductor stocks, is expanding. Although leveraged investments have also increased significantly, as the total market value rises, the proportion of credit trading balance to total market value has decreased, leading to an ironic perception of decreased riskiness. In order not to be engulfed by statistical illusions, we are closely monitoring and are actually taking this issue seriously."
South Korean Retail Investors Express Disbelief Over SpaceX IPO Subscription Failure
Regarding the recent SpaceX IPO subscription allocation failure, Lee Chan-jin expressed strong dissatisfaction. "Not a single share was allocated, and I cannot understand this. The allocation process was simply unbelievable. From an investor's perspective, this is also a very inconvenient and unsatisfactory situation. If you didn't participate in the IPO subscription, you could have bought the stock on the first day of trading, but wasn't that money tied up in the IPO subscription?" Lee Chan-jin further stated, "To protect investors and prevent recurrence, the findings regarding future securities will be shared."
