South Korea market watchdog offers rare mea culpa over leveraged ETFs
A 3D printed word “ETF (Exchange-Traded Fund)” is seen in front of decreasing stock graph in this illustration taken October 16, 2025. REUTERS/Dado Ruvic/Illustration
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SEOUL, June 22 : The head of South Korea’s market watchdog offered a rare mea culpa on Monday, saying it was too hasty in approving leveraged funds tied to some of the country’s best-known chip stocks.
The comments from Lee Chan-jin, governor of the Financial Supervisory Service, are some of the starkest yet about the risks of the leveraged exchange-traded funds linked to shares of Samsung Electronics and SK Hynix.
Lee said the watchdog was considering introducing stabilising measures to help offset the volatility sparked by the products. He said he regretted the launch was done too hastily.
“We are cautiously monitoring and seriously looking into it,” Lee said at a press conference about the measures they were considering, declining to elaborate further.
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The rare self-critique comes days after the watchdog issued an investor warning on the products. It gave brokerages the go-ahead last month to launch the ETFs, which helped drive borrowed investment into equities by retail investors to a record 60 trillion won ($39 billion) by the end of May.
The leverage boom had been part of a broader push to draw Korean investors back from U.S. markets, where many have gravitated since the pandemic.
South Korea’s benchmark KOSPI stock index has been the world’s best performer in an AI-driven rally, rising more than 110 per cent so far this year, adding to last year’s 76 per cent surge.
The market has been powered by Samsung Electronics and SK Hynix, which together account for more than 50 per cent of the index.
Korea Exchange CEO Jeong Eun-bo told a separate press conference on Monday that local authorities would also make regulatory improvements around the investment products if needed.
There were also efforts being made to introduce the leveraged ETFs tied to South Korean chip stocks abroad, including in Hong Kong and London, he said.
MSCI UPGRADE
Despite the South Korean market’s bull run, it has yet to secure an upgrade to developed market status from index-compiler MSCI.
Gaining that status is a flagship goal of President Lee Jae Myung’s administration, which took office in June 2025, as part of a broader push to revitalise the stock market.
But the FSS’s Lee said that the country is in no hurry, citing heightened volatility and unresolved structural issues. He also said concerns were growing at home about the risks of a sudden upgrade during a period of extreme market swings.
In its annual market accessibility review last week, MSCI said South Korea still falls short on key criteria, including the absence of fully deliverable offshore currency markets, ahead of this week’s classification decisions.
The government has introduced various market reforms and plans to open up the currency market around the clock from the second half of this year to improve foreign access.
($1 = 1,536.7000 won)
Source: Reuters
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