South Korean exchange-traded funds (ETFs) opened lower as a group. As of the time of writing, the Leveraged SK Hynix ETF (07709) has fallen by 14.99%, trading at HK$61.02. The Leveraged Samsung Electronics ETF (07747) is down 14.99% at HK$87.82, while the TR Korea ETF (02848) has declined by 6.98% to HK$1,680.
This movement follows a significant downturn in the South Korean stock market at the open on July 16, which prompted the Korea Exchange to initiate a temporary trading halt mechanism for the KOSPI index. Among individual stocks, SK Hynix shares dropped over 10%, and Samsung Electronics fell more than 7%.
The sell-off was preceded by a sharp decline in U.S. memory chip stocks overnight. SK Hynix shares fell over 9% in U.S. trading, with Micron Technology, SanDisk, and Western Digital all dropping more than 8%.
In a key monetary policy development, the Bank of Korea announced on July 16 that it would raise its benchmark interest rate by 25 basis points to 2.75%. This marks the central bank's first rate increase since January 2023.
In a recent policy meeting in Seoul, President Yoon Suk Yeol acknowledged that controversy surrounding leveraged ETFs is intensifying. He directed the heads of the Financial Supervisory Service and the Korea Exchange to address the issue promptly and prepare follow-up measures.
The Korea Financial Investment Association has disclosed that the chief executives of ten major domestic asset management companies have begun discussions on investor protection arrangements for single-stock leveraged ETFs. The topics under consideration include raising the minimum deposit threshold and diversifying the timing of daily rebalancing trades.
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