Korea Exchange Chairman Jeong Eun-bo, center, celebrates Kospi closing past 8,000 points in a ceremony held at its office in western Seoul on May 26. The Kospi on the day rose 2.55 percent to close at a record 8,047.51. [YONHAP]
Exchange-traded funds (ETF) tracking Samsung Electronics and SK hynix shares at twice their daily movement are set to debut on Korea’s stock market on Wednesday, raising concerns that the government may be prioritizing market stimulus over financial stability.
The products include 16 leveraged ETFs designed to deliver gains or losses equal to two times the daily movement of the underlying shares, along with two inverse ETFs that move in the opposite direction. The combined value of the planned listings amounts to 4.32 trillion won ($2.88 billion).
More than 130,000 investors have already completed mandatory education courses required to purchase the products. Industry estimates suggest the launch could attract more than 5 trillion won in fresh investment funds.
These ETFs are considered extremely high-risk products because leverage magnifies both gains and losses. Given Korea’s daily stock price movement limit of 30 percent, investors could theoretically record gains or losses of up to 60 percent in a single day.
