SEOUL, July 29 : South Korea will introduce additional curbs on single-stock leveraged exchange-traded funds (ETFs), including a cap that could limit an individual’s investment in such products to 20 per cent of their total investment assets, the finance ministry said on Wednesday.
The measures follow sharp swings in the local stock market, which authorities said had been exacerbated by concentrated bets in single-stock leveraged products.
The government will also raise the cost of related trading to curb excessive activity, potentially by applying charges similar to those imposed for excessive order submissions in the futures market, it said after an emergency meeting of financial authorities.
Authorities will introduce simulated trading requirements in addition to existing investor education, and prepare a legal basis allowing regulators to take market stabilisation measures in emergencies, drawing on examples, including Hong Kong’s flexible leverage framework.
The measures will be pursued immediately, the ministry said, while previously announced safeguards, including raising the minimum cash deposit requirement to 30 million won ($20,646) would take effect from July 31.
South Korea has already halted new listings of single-stock products and banned advertising for them.
The KOSPI fell 5.98 per cent on Wednesday, after dropping 10.84 per cent in the previous session. Authorities said they would maintain round-the-clock monitoring of financial markets and deploy available policy tools if needed.
($1 = 1,453.0700 won)