South Korea Minister Apologizes Over Leveraged ETF Losses
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- South Korea's finance minister Koo Yun-cheol apologized on Wednesday after retail investors racked up heavy losses from leveraged stock bets, accepting lawmakers' demand for an apology in a parliamentary session.
- Since the May 27 introduction of single-stock leveraged ETFs, Korean retail investors made net purchases of 14 trillion won ($9.7 billion), compared with roughly 2 trillion won by foreign investors, according to KB Financial Group.
- The KODEX SK Hynix Single Stock Leverage ETF has fallen more than 80% from its June 23 peak, while the equivalent Samsung Electronics product dropped almost 75% from its June 3 peak, according to LSEG data.
- The Kospi index plunged almost 35% over the last month, led by a downturn in chip stocks that reversed a blistering AI-driven semiconductor rally.
- Financial Services Commission chair Lee Eog-weon told the National Assembly the regulator is considering restricting access to these products to professional investors only.
- Lee also indicated regulators could lower the 2x leverage multiple if legislation is prepared, stating that "two times is too large" and reducing it "would likely have an effect in terms of easing volatility."
Why it matters: Retail investors deployed 14 trillion won into single-stock leveraged ETFs in just weeks — seven times the foreign inflow — and now hold products down 75-80% from their peaks. The FSC's openness to restricting access to professional investors and cutting the 2x multiple marks a sharp policy reversal only months after the products launched, with Korea's new 30 million won minimums a likely interim step.
