The Korea Financial Services Commission announced that, as of that date, it would suspend all new, leveraged-exchange product (ETP) listing applications and simultaneously tighten bonds, premium rates and investor education requirements. The regulatory level is mainly concerned with a marked increase in market volatility following the recent influx of bulk funds into the tristar electronics, SK Hercules and other semiconductors.
Raise the security threshold.
Under the new arrangement, the basic security required to invest in such products will be increased from 10 million won to 30 million won, which is planned for August. At the same time, it was clear to the regulator that in future only cash could be included in the basic bond and that alternative encumbered assets such as national debt were no longer included in the calculation.
In addition to the bond, the Republic of Korea will tighten the transaction chain requirements. The securities firm's standards for managing ETF premiums will be revised downwards from 3 per cent to 2 per cent. The length of investor education was extended from 2 hours to 3 hours. The smallest trading unit for a leveraged product is also scheduled to increase temporarily from 1 to 20.
Semiconductor unit fluctuations amplified
In the recent past, the Korean market has intensively launched a double-linked semiconductor pilot leverage ETF. Since such products require a larger-scale rebalancing and rebalancing before closing on a daily basis, the purchase and sale drive is considered to have magnified the composition of the tailings, which does not act as a dispersing risk and exacerbates short-line price shocks.
Jason Minsang Kam, Head of Equity Investment, Kyobo Life Insurance, stated that these measures are likely to limit the access of bulk investors to leverage ETFs, which in the short term will help to reduce market volatility.
The global stock market is under pressure to hold up.
The report also mentions that cooling measures in the Korean market also reflect common problems facing the global equity market: Against the backdrop of a fall in inflation and an expected rise in interest rates, the good news push for the stock market is weakening. Market focus is shifting from macro-information to hold-up and business performance guidance.
Multi-agency data indicate that the global stock warehouse is now at a high level. According to Deutsche Bank, the stock exposure for systematic strategic funds has risen to 72nd percentile, and the Volatility Control Fund is 91st percentile. For its part, the Bank of France noted that equity funds had risen to a historical extreme of 64.7 per cent of global fund assets, excluding large commodities.
According to Chase Morgan, the current macro-market environment is still friendly, but in a situation where multiple silos are already congested, the market needs new catalysts to drive the next round.