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President Lee Jae-myung speaks during a government policy briefing held at the State Guest House of Cheong Wa Dae on the 15th (local time). This policy briefing, the second since his inauguration, includes about 20 members of a "public participation group" in each session. / Yonhap

President Lee orders swift corrective measures on single-stock ETFs shaking local market

President Lee Jae-myung instructed officials on the 15th to "swiftly prepare corrective measures" regarding single-stock leverage exchange-traded funds (ETFs) tied to Samsung Electronics and SK Hynix, which have been blamed for the recent extreme volatility in the Kospi.

The order came after the launch in May of single-stock leverage ETFs, which offer twice the return of share price gains, amplified stock market volatility. This triggered heavy criticism from both opposition parties and the market that "the government has turned the stock market into a casino," prompting the president to demand regulatory fixes.

During a joint policy briefing from the Ministry of Finance and Economy and the Financial Services Commission held at Cheong Wa Dae, President Lee said, "The normalization and advancement of the capital market is an important task, so please look after it closely."

In particular, addressing Financial Supervisory Service Governor Lee Chan-jin and Korea Exchange Chairman Jung Eun-bo, President Lee noted, "It seems you have been taking a lot of heat recently due to the Samsung Electronics and SK Hynix ETFs," and "the Korea Exchange is also in turmoil because of these ETFs."

He went on to urge, "When a system is first introduced, side effects can cause confusion, but controversial policies must be pushed forward with caution. Introduce necessary measures swiftly even if there is resistance, but approach controversial areas with care."

With President Lee personally calling for corrective measures, discussions on the matter are expected to take place during the F4 (Ministry of Finance and Economy, Bank of Korea, Financial Services Commission, and Financial Supervisory Service) meeting scheduled for the 16th.

President Lee also reiterated his emphasis on normalizing the capital market and shifting toward productive finance.

"The share of real estate in our society's asset allocation is still far too large," President Lee pointed out. "No other developed nation clings to real estate to this extent." He added, "With available resources locked up in real estate, it leads to inefficient resource allocation. Transitioning toward productive finance is a vital task."

He also urged speed on capital market legislation, including the "Anti-Stock Price Suppression Act" and tougher inheritance and gift taxes for controlling shareholders of undervalued listed companies. Speaking to Financial Services Commission Chairman Lee Eok-won, President Lee said, "The Anti-Stock Price Suppression Act and other bills seem to be stalled in Congress. Please do whatever it takes to secure cooperation and speed up the process."

Additionally, President Lee touched upon South Korea's failed bid to join the Morgan Stanley Capital International (MSCI) Developed Markets Index, stating, "The domestic stock market experienced an unprecedented, massive surge, and it needs time to stabilize. Inclusion in this index would have helped with that stabilization."

In response, Deputy Prime Minister and Minister of Finance and Economy Gu Yun-cheol replied, "We expect to implement many institutional reforms by early next year. We will actively push for the MSCI inclusion next year."

                                                                                                             Hong Sun-mi