South Korea’s Financial Services Commission indicated on Tuesday that the country’s regulatory authorities were reviewing potential restrictions on leveraged exchange-traded funds for individual investors. Lee Eog-weon, chairman of the FSC, met with local brokerages and asset managers in Seoul to discuss the matter.
The potential measures under consideration include implementing a cap on the total investment value that individual retail investors could hold in single-stock leveraged ETFs. These products are predominantly tied to Samsung Electronics and SK Hynix, South Korea’s two largest companies and major semiconductor manufacturers.
This announcement comes as a follow-up to regulatory action taken earlier in the week, when authorities increased the cash deposit requirements that retail investors must maintain to trade leveraged ETFs. The regulator has signaled its intent to prepare additional measures designed to reduce demand for these investment products.
Market volatility accompanied the regulatory discussion, with both major semiconductor firms experiencing significant declines. Samsung Electronics shares fell as much as 9.7% in Seoul trading on Tuesday, amid concerns about potential market share losses to Chinese competitor CXMT and financing risks related to artificial intelligence infrastructure investments. SK Hynix, which recently completed an American Depositary Receipt listing in the United States, declined as much as 11.2% in Seoul on the same day, with its ADR falling 10% on Nasdaq on Monday to trade below its initial public offering price.
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