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/ Yonhap

The Blue House and the government have hinted at further revisions to the management system of single-stock leveraged Exchange-Traded Funds (ETFs), following their recent moves to block new listings and raise barrier to entry for investors. This is a follow-up measure to President Lee Jae-myung's directive on July 15, ordering swift complimentary steps out of concern over retail investor losses and heightened stock market volatility.

Appearing on KBS 1TV’s "Sunday Diagnosis" on July 19, Blue House Chief of Staff for Policy Kim Yong-bum stated, "Delisting Samsung Electronics and SK Hynix leveraged ETFs would be difficult given the potential shock to the market." The government is focusing on "improving the management structure" while minimizing market disruptions, rather than immediately eliminating existing products.

The fact that the total asset value of these products has already exceeded 10 trillion KRW, with over 90% of the investors being retail buyers, also makes delisting highly challenging. If these funds were to be liquidated, the unwinding of positions by retail investors combined with asset managers adjusting their hedges could concentrate massive selling pressure on Samsung Electronics and SK Hynix.

"We need to explore additional measures, such as adjusting management intervals or utilizing derivatives, to prevent trading volume from concentrating during specific time slots while managing tracking errors," Kim said. The intent is to lower the impact on the spot market by modifying the structure where asset managers aggressively buy or sell underlying stocks right before the closing bell to meet their target leverage ratios.

Previously, on July 16—just one day after President Lee’s directive—the government unveiled its initial package of safeguards, which included a temporary halt on new listings, an advertising ban, a hike in the minimum cash deposit requirement to 30 million KRW, and an increase in the minimum trading unit to 20 shares.

As of July 15, the combined market capitalization of the 16 related ETFs reached 11.9 trillion KRW, with daily trading volume hitting 13 trillion KRW. Voices within the ruling camp are calling for further regulatory revisions to curb excessive concentration in specific stocks and mitigate losses for individual investors.

Conversely, the opposition People Power Party directed its criticism squarely at Chief of Staff Kim, demanding accountability. Citing the recent market crash and successive circuit breakers, Floor Leader Jeong Jeom-sig criticized, "We can no longer leave the fate of the Korean economy in the hands of Policy Chief Kim Yong-bum," adding that "the government ignored the market's warnings regarding excessive volatility."

Lawmaker Na Kyung-won also took to Facebook to criticize the government for "merely pretending to fix the barn after the horse has bolted with lax measures," urging President Lee to dismiss Kim from his post.

                                                                                                         Park Young-hoon