South Korea is holding an emergency meeting of its top financial authorities, led by Finance Minister Koo Yun-cheol, to address a severe stock market selloff. The meeting, scheduled for 6 p.m. local time on July 29, follows a day of parliamentary questioning where lawmakers criticized the government's handling of the market and the introduction of leveraged single-stock exchange-traded funds (ETFs). The Kospi index has plummeted approximately 40% from its peak in June, triggering market-wide circuit breakers for a second consecutive day after weaker-than-expected earnings from SK Hynix Inc. intensified selling.
Lawmakers have directly attributed the market's amplified volatility, which they say makes South Korea's equity market significantly more unstable than its global counterparts, to these leveraged single-stock ETFs. They argue that speculative trading has become overly concentrated in a few blue-chip stocks, including SK Hynix Inc. and Samsung Electronics Co. Opposition lawmakers, like People Power Party's Lee Jongwook, called the introduction of these products a "policy failure" and stated they should never have been allowed on the market.
Regulators, including the Financial Services Commission, are responding by preparing further curbs on leveraged ETF trading. These potential measures include investment caps for individuals, mandatory investor education, and additional trading restrictions, especially if new requirements implemented on July 31 fail to temper demand. Finance Minister Koo apologized for not examining these products more carefully before their launch, while also maintaining that leveraged ETFs were only one factor in the market turmoil and that further steps are being considered to normalize the market.
