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South Korea weighs tighter rules on leveraged single-stock ETFs
The proposals would give regulators power to cut leverage ratios and raise minimum investment requirements, aiming to curb losses that followed sharp declines in Samsung Electronics and SK Hynix shares.
South Korea’s financial authorities are considering tighter curbs on leveraged exchange-traded funds tied to individual stocks, as they seek to stabilize a volatile domestic market that has left many investors with heavy losses and mounting debt, according to SCMP Economy.
The potential measures reportedly include empowering regulators to reduce the leverage ratio of single-stock leveraged ETFs and raising minimum investment requirements to discourage inexperienced retail investors from taking excessive risk.
Single-stock leveraged ETFs are designed to amplify a company’s share move using derivatives, typically targeting twice the stock’s daily return. Unlike conventional diversified ETFs, these products are linked to one firm, such as Samsung Electronics or SK Hynix.
Local media coverage cited by SCMP Economy says the funds surged in popularity during a stock market rally, but have faced scrutiny for magnifying volatility after semiconductor-linked names fell sharply from record highs reached in June.