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2x Leveraged Products on Samsung Electronics and SK Hynix to Launch Locally by End-May; S Korea FSC Warns of Extremely High Potential Loss Risk
According to the English edition of The Chosun Daily in S Korea, ahead of the listing on the 27th of this month of leveraged products tracking 2x the volatility of individual stock...
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2x Leveraged Products on Samsung Electronics and SK Hynix to Launch Locally by End-May; S Korea FSC Warns of Extremely High Potential Loss Risk
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According to the English edition of The Chosun Daily in S Korea, ahead of the listing on the 27th of this month of leveraged products tracking 2x the volatility of individual stocks such as Samsung Electronics and SK Hynix, the Financial Services Commission (FSC) of S Korea said today (15th) that these products track twice the price movements of individual stocks and are concentrated in a single stock, thus carrying significant investment risk. Investors should note that such products have a much higher potential loss risk than ordinary ETFs.

The FSC further explained that during periods of repeated price fluctuations in the underlying stock, leveraged single-stock products may result in a continuous erosion of principal even if the stock price remains unchanged. They should only be used as short-term investment instruments.

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In addition, to reduce investor confusion, the FSC has prohibited the use of the term "ETF" in product names and mandated the inclusion of the wording "single stock". The regulator also plans to subject trading of single-stock leveraged ETFs by senior executives of listed companies, financial investment firms and securities-related institutions to the same regulations as trading in individual stocks.

Previously, authorities decided to allow only high-quality domestic stocks meeting specific criteria  such as an average market capitalization weighting of at least 10% and an average trading value weighting of at least 5%  to issue single-stock leveraged ETFs. Samsung Electronics and SK Hynix, which meet these requirements, will list their single-stock leveraged products on the 27th.

The FSC added that if market conditions change and the underlying assets no longer meet the requirements, new issuance listings will be restricted. For products already listed that fail to meet the requirements, immediate disclosure will be required, and if the non-compliance persists for three months, relevant rules will be revised to delist them. (da/u)

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