South Korean Lawmaker Calls for Samsung, SK Hynix to Delist Leveraged ETFs, Saying KOSPI Has Become a "Casino"

BlockBeats News, July 6th - The regulatory controversy over a single-stock leverage ETF in South Korea continues to escalate. South Korean National Power Party member and former presidential candidate Ahn Cheol-soo publicly called for strong measures, including delisting, against the single-stock leverage ETFs tracking Samsung Electronics and SK Hynix, stating that the Korea Composite Stock Price Index (KOSPI) has "degenerated into a casino."

Ahn Cheol-soo stated that the current inflow of funds into the Samsung Electronics and SK Hynix leverage ETFs has reached 212 trillion Korean won, with the two companies accounting for approximately 60% of the KOSPI's total market value. The combination of high-weighted stocks and leveraged funds has amplified market volatility. So far this year, the South Korean stock market has triggered the "limousine mechanism" (programmed trading suspension) 31 times, activated circuit breakers 5 times, and saw the KOSPI panic index rise to a record high of 90.8.

In late May of this year, South Korea launched the first batch of domestic single-stock 2x leveraged ETFs aimed at attracting high-risk trading demand back to the domestic market. However, after the products were listed, intense price deviations occurred due to daily rebalancing and liquidity issues. In early June, a leverage ETF tracking SK Hynix surged by about 50% in a single day, while the underlying stock fell by nearly 8% during the same period. The fund's secondary market price once traded at a premium of up to 86% over the net asset value, which quickly disappeared the next day, leading to a sharp 27% decline in the ETF.

With increasing market volatility, the Bank of Korea and South Korea's financial regulatory agencies have recently sent out more cautious regulatory signals. The Bank of Korea warned that the continuous expansion of single-stock leverage ETFs may further increase market concentration, exacerbate market volatility, and amplify the risk of losses for retail investors. The South Korean National Assembly has initiated a review of such products, discussing further tightening regulatory measures, and even pushing for the delisting of related products.