Korean exchange-traded funds (ETFs) are declining broadly, tracking the downturn in the KOSPI index.
As of the latest trading, the TR Korea (02848) ETF dropped 7.15% to 1404 Hong Kong dollars, while the Samsung Global Semiconductor (03132) ETF fell 4.88% to 56.5 Hong Kong dollars. The Southern Hang-Tech Korea (03431) ETF also declined 2.64% to 9.225 Hong Kong dollars.
Key Domestic Developments
According to market reports, during a symposium, the head of the Korea Financial Services Commission, Lee Eog-weon, stated that priority will be given to closely monitoring the effectiveness of supplementary measures, such as the strengthening of basic deposit requirements, which took effect on July 31. Lee Eog-weon also indicated that if market demand is not sufficiently calmed, the authorities will proactively study and prepare additional measures.
Furthermore, the South Korean Finance Minister has apologized for the introduction of single-stock leveraged ETFs without sufficient due diligence. The Finance Minister noted that the government is currently conducting internal reviews of measures to stabilize the domestic stock market.
Market Impact and Context
In a significant move on July 29, the South Korean stock market faced another severe downturn. The KOSPI index dropped more than 12% intraday, falling below 5,300 points, representing a cumulative decline of over 43% from its historical peak.
UBS previously argued that the South Korean government's new regulations on single-stock leveraged ETFs, combined with the market's own deleveraging pressure, are reshaping the short-term volatility dynamics of the KOSPI. In the short term, uncertainty surrounding AI demand prospects and fluctuations in the earnings outlook for companies like Samsung Electronics and SK Hynix will continue to drive up market volatility. This rise in volatility, in turn, is expected to accelerate the further contraction of leveraged ETF sizes.
Comments