South Korea is to temporarily halt new listings of single-stock leveraged exchange-traded funds (ETFs) to curb market volatility after a surge in popularity of the products tied to Samsung Electronics Co and SK Hynix Inc.The ban would remain in place until market conditions stabilize, the South Korean Financial Services Commission said in a statement yesterday.Authorities would also raise the minimum deposit requirement — or minimum account balance in cash required — for leveraged ETF trading to 30 million won (US$20,300) from 10 million won, expected to be implemented on Aug. 5.
A man walks in front of an electronic board displaying the KOSPI and KOSDAQ at a bank in Seoul yesterday.
The decision comes after a meeting among regulators, the South Korean Ministry of Finance and central bankers amid growing calls for policymakers to rein in volatility in the US$4.1 trillion equity market, which has become one of the world’s most turbulent.More than a dozen leveraged ETFs launched two months ago — which aim to deliver twice the daily return of Samsung Electronics and SK Hynix shares — have been blamed by market participants for exacerbating price swings through large rebalancing trades needed to maintain their target leverage.
