THE GOVERNMENT OF KOREA HAS ANNOUNCED THAT IT WILL STUDY MEASURES TO IMPROVE THE KK HERCULES ' VOLATILITY AND LEVERAGE ETF RISKS

ON 7 JULY, AS SK HERCULES STOCK PRICE VOLATILITY INCREASED, THE MARGIN OF RETURN WIDENED TO MORE THAN 5 PERCENTAGE POINTS BETWEEN THE SINGLE-STOCK LEVERAGE EXCHANGE FUND (ETF), WHICH TRACKS A DOUBLE DECLINE IN SK HERCULES STOCK PRICES. THE MARKET NOTED THAT INVESTORS NEEDED TO BE MORE VIGILANT AS DIFFERENCES IN PRODUCT STRUCTURE AND FUND MANAGEMENT CAPACITY WERE BEING REFLECTED DIRECTLY IN THE RATE OF RETURN. AT THE SAME TIME, THE DEPUTY PRIME MINISTER AND MINISTER OF BUSINESS AND FINANCE OF THE REPUBLIC OF KOREA, YUN CHUL, STATED THAT, FOR A SINGLE LEVERAGE PRODUCT, “A PERFECTING PROGRAMME IS BEING DISCUSSED”. HOWEVER, THE VIEW WAS ALSO EXPRESSED THAT, IN ADDITION TO THE PRODUCT STRUCTURE, THE MANAGEMENT CAPACITY OF THE FUND WAS EQUALLY IMPORTANT. AS A RESULT OF THE RECENT LARGE AND REPEATED ONE-DAY INCREASES OF ABOUT 10 PER CENT IN SAMSUNG ELECTRONICS AND SK HERCULES STOCK PRICES, THE FOUNDATION IS UNDER GREATER PRESSURE TO MANAGE NET DEVIATIONS AND ADJUST ITS PORTFOLIO IN REAL TIME. AFTER THE MARKET COLLAPSED THAT DAY, 14 SINGLE-STOCK LEVERAGE PRODUCTS ASSOCIATED WITH SAMSUNG ELECTRONICS AND SK HERCULES, ALL OF WHICH AT ONE TIME BROKE THE MARKET PRICE OF 20,000 WON. THE DEPUTY PRIME MINISTER OF KOREA, YUN CHUL, STATED AT THE PLENARY MEETING OF THE BUSINESS PLANNING AND FINANCE COMMITTEE ON THE SAME DAY: “I AM WELL AWARE THAT THE CURRENT PRESENCE OF LEVERAGE ETF IN THE MARKET IS A SOURCE OF CONCERN FOR GREATER VOLATILITY IN THE STOCK MARKET.” HE EXPLAINED THAT “IN INTRODUCING THE RELEVANT POLICIES, FOREIGN EXCHANGE AND CAPITAL MARKETS WERE BEING CONSIDERED AT THE SAME TIME, BUT SOME PROBLEMS HAVE ARISEN.” WE ARE DISCUSSING HOW TO IMPROVE THE SYSTEM AND MINIMIZE THESE PROBLEMS AND NEGATIVE IMPACTS.”