Korean Presidential Office: Suggests Comprehensive Review of the Korean Capital Market, Including Leveraged ETFs

BlockBeats News, July 29th. Kim Yong-bum, Head of the Presidential Office for Policy Planning at the Blue House, responded to the recent sharp decline of the KOSPI index. He pointed out that the current market is undergoing an internal debate regarding AI investment—on one hand, there are concerns about the long-term sustainability of large-scale capital expenditures by major tech companies, with "continuous semiconductor supply increase, but a lack of certainty about whether future demand can continue to support it"; on the other hand, the accelerated catch-up of the Chinese semiconductor industry has brought new competitive pressure, and news such as SMIC's IPO and breakthroughs in China's photolithography equipment manufacturing technology have prompted the market to reevaluate whether Korea's competitive gap in storage chips remains solid. However, Kim Yong-bum emphasized that the demand for AI is not temporary and that the "demand will remain robust." He believes Korea should seize this opportunity to accelerate factory construction, make timely investments, and reinforce research and development.

Regarding the amplification of volatility in the domestic market in South Korea, Kim Yong-bum clearly stated that leveraged ETFs are not the sole answer. The market structure in which semiconductor and AI-related stocks in Korea account for as much as 40% to 50%, the high proportion of derivatives and ETFs, and the composition of investors together have significantly increased the volatility compared to overseas markets. Although leveraged ETFs may cause temporary market disruptions during the closing rebalancing process, sometimes volatility occurs in the morning, which can solely exclude leveraged ETFs as a single driving factor based on the time distribution. Kim Yong-bum suggested that the Financial Services Commission of Korea conduct a comprehensive review of the overall structure of the capital market, including leveraged ETFs.