Exchange-traded funds that track the South Korean market are experiencing significant declines.
TR Korea (02848) has dropped 11.77% to HKD 1,603.5.
Samsung Hang Kang Technology (03431) has fallen 7.22% to HKD 10.02.
Samsung Global Semiconductor (03132) has decreased 2.99% to HKD 65.
Regulatory Scrutiny on Leveraged ETFs
Reports indicate that South Korean financial authorities have requested asset management firms to submit specific proposals to address potential market volatility caused by single-stock leveraged ETFs. The authorities plan to compile industry feedback before formally initiating the development of measures to curb market instability.
Government Monitoring
Adding to the regulatory focus, the policy chief of the presidential office, Kim Yong-beom, stated during a press conference that the F4 meeting—comprising top financial regulators—is closely monitoring the impact of single-stock leveraged ETFs on the market. He noted that decisions on any necessary remedial actions would be made at the F4 market condition review meeting.
Monetary Policy Expectations
Simultaneously, expectations for an interest rate hike by the Bank of Korea are strengthening. Governor Shin Hyun-song recently emphasized the need to raise the benchmark interest rate at an appropriate time, citing three key factors: inflation exceeding targets, improving economic growth, and rising financial stability risks.
Governor Shin pointed out that first-half inflation was primarily driven by supply-side shocks, such as international oil price pass-through. However, he stressed that the underlying drivers of inflation are undergoing a structural shift.
The market widely anticipates that the Bank of Korea's Monetary Policy Board meeting on the 16th will announce a rate increase. This would mark the first hike since August 2021.
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