▲ Financial Supervisory Service Governor Lee Chan-jin speaks during a press conference held at the FSS headquarters in Yeongdeungpo-gu, Seoul, on June 22.
Financial Supervisory Service (FSS) Governor Lee Chan-jin admitted that he regrets the introduction of single-stock leverage exchange-traded funds (ETFs) for Samsung Electronics and SK Hynix, effectively acknowledging a policy failure and stating that he is preparing safety measures for investors.
Regarding the recent "debt-financed investment" craze, Lee also warned against "statistical illusions," where the ratio of credit-based margin trading balances to total market capitalization appears to decrease due to the overall growth of the stock market, masking the true level of risk.
During a regular press conference held at the FSS headquarters in Yeouido, Seoul, this morning, Governor Lee assessed the recent stock market situation, stating, "Market instability and volatility have intensified significantly, with turnover rates surging. In particular, trading is becoming increasingly concentrated on semiconductor stocks."
He continued, "While leveraged investment has expanded significantly, an ironic phenomenon is occurring where the ratio (of credit margin balances to total market cap) is decreasing as the total market cap rises, making the situation feel less severe. We are monitoring this closely to avoid being trapped by statistical illusions, and we are viewing the situation with great seriousness."
Governor Lee expressed strong concern regarding the overheating of investments in single-stock leverage ETFs for Samsung Electronics and SK Hynix.
This system was introduced at the end of last year to divert the investment demand of "Seohak Ants" (individual Korean investors who invest in overseas markets) toward the domestic stock market amid a period of high exchange rates.
Lee pointed out, "The extreme turnover rate of these products is resulting in a situation where only securities firms are profiting."
"I am worried that it will look like the person taking a 'cut' from a gambling table is the one making all the money," Lee said. "I am deeply concerned that the actual players are not seeing any real benefits, while the systems managing and operating them are the ones profiting."
He also noted that the turnover rate for these products reached nearly 200% at times, estimating that the trading commissions earned by securities firms could reach as much as 10 trillion won.
"Although the FSS recently issued a consumer alert regarding these products, it has not led to a 'cooling down' effect," Lee said. "Most of the investors are middle-class or working-class individuals, and if stock market volatility hits, it could deal a major blow to household finances. Therefore, we are considering separate safety measures."
Specifically, he added, "We are looking into ways to mitigate external shocks related to credit. We will deliberate with policy authorities on how to handle this, step by step, from margin calls to credit trading."
(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.