THE KOREAN FOUR DEPARTMENTS WILL MEET ON THURSDAY TO DISCUSS SINGLE-SHARP ETF RISKS

ON 14 JULY, THE KOREA TIMES REPORTED THAT THE KOREAN FINANCIAL REGULATORY AUTHORITY WOULD CONVENE A HIGH-LEVEL MEETING ON THURSDAY TO DISCUSS THE RISKS AND RESPONSES TO SINGLE-STOCK LEVERAGE ETF. THE MEETING IS EXPECTED TO TAKE PLACE WITHIN THE FRAMEWORK OF THE “F4 CONFERENCE” OF THE GOVERNMENT'S COORDINATION MECHANISM ON MACROECONOMIC AND FINANCIAL ISSUES, WHICH WILL BE ATTENDED BY OFFICIALS FROM THE MINISTRY OF FINANCE AND ECONOMY, THE FINANCE COMMISSION, THE FINANCIAL SUPERVISORY AUTHORITY AND THE CENTRAL BANK OF KOREA. SOUTH KOREAN STOCK MARKET VOLATILITY HAS CONTINUED TO INCREASE IN THE RECENT PAST, AND SINGLE STOCK LEVERAGE ETF IS RECEIVING INCREASING ATTENTION FROM REGULATORS AND MARKET PARTICIPANTS. IT WAS FELT THAT SUCH PRODUCTS HAD BECOME AN IMPORTANT FACTOR IN THE VOLATILITY OF STOCK PRICES. ACCORDING TO INFORMED OFFICIALS, THE SUPERVISORY AUTHORITY HAS BEEN COORDINATING RELEVANT PROGRAMMES INTERNALLY IN RECENT DAYS, BUT THE POLICY DIRECTION HAS NOT YET BEEN FINALIZED. POSSIBLE MEASURES DISCUSSED IN THE MARKET INCLUDED RAISING THE LEVEL OF SECURITY REQUIREMENTS, LIMITING DAILY PRICE VOLATILITY AND ADJUSTING THE LEVERAGE MULTIPLIERS. HOWEVER, IN THE VIEW OF REGULATORS, THESE MEASURES MAY ONLY SERVE AS A TEMPORARY MITIGATION TO ADDRESS THE STRUCTURAL CAUSES OF MARKET VOLATILITY. KIM XIAN