Single Stock Leverage Launched This Week… Authorities Concerned Amid Market Volatility

Inexperienced investors are concerned about losses from investing beyond their capacity… Focus on guidance
Monitoring market impacts… No plans to expand underlying assets beyond the current ones,
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Samsung Electronics and SK Hynix
[Photo taken by Kim Seong-min and Hong Ki-won],
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, ‘ (Seoul=Yonhap News) Reporter Kim Ji-yeon = A single-stock leveraged product tracking the price movements of Korea’s two leading semiconductor companies by ±2 times will be launched this week.’,
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, ‘ Financial authorities are concerned that in the current volatile stock market, even large-cap stocks can experience extreme fluctuations, leading investors who are not fully informed to suffer excessive losses. They are focusing on guiding and warning investors about these risks.’,
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, ‘ According to financial authorities on the 25th, a single-stock leveraged product tracking Samsung Electronics and SK Hynix’s daily fluctuation rate by ±2 times will be listed on the Korea Exchange on the 27th.’,
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, ‘ This product was ambitiously introduced to address the asymmetrical regulatory issue and meet diverse investment needs, but as its launch approaches, concerns about investor losses are evident.’,
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, ‘ Inexperienced investors might engage in speculative trading they cannot handle, potentially resulting in excessive losses.’,
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, ‘ Especially given the large recent price swings of Samsung Electronics and SK Hynix, the introduction of this single-stock leverage could lead to excessive capital concentration, expanding stock market volatility.’,
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, ‘ A Financial Services Commission official said, “We’re concerned about situations where individuals buy beyond their risk tolerance,” adding, “One must also consider the negative compounding effect, as the very possibility of a twofold drop is a significant risk.”‘,
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, ‘ A Financial Supervisory Service official expressed worry about inexperienced investors stepping in and trading speculatively, “Given the large price fluctuations these days, inexperienced investors might enter thinking it’s just Samsung Electronics and incur losses.”‘,
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The KOSPI, Samsung Electronics, and SK Hynix stock prices displayed on a screen at Hana Bank’s dealing room on the 21st
[Yonhap News file photo],
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, ” Unlike regular ETFs, this product is not diversified and is based on individual stocks, meaning losses of up to 60% in a single day are possible. Even in a flat market, the negative compounding effect can erode investments, making it suitable for short-term trading.”,
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, ‘ In a scenario where the index falls 20% and then rises 20%, regular products suffer a 4% loss (100→80→96), but leveraged products suffer a 16% loss (100→60→84).’,
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, ” Reflecting this, the product name omits ‘ETF’ to avoid suggesting diversification, and protective measures include additional in-depth education (1 hour) beyond the existing pre-education (1 hour), and a requirement to deposit at least 10 million won initially.”,
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, ‘ A Financial Supervisory Service official stated, “We continue to remind the industry about the importance of not engaging in exaggerated advertising,” and suggested that the product should actually emphasize its risks even more.’,
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, ‘ Ahead of the product launch, the Financial Supervisory Service has directed financial companies to avoid marketing activities that could mislead investors.’,
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, ‘ The single-stock leveraged product was largely created as a response to the currency appreciation situation to redirect investment funds back into Korea.’,
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, ‘ There was a perception that aggressive individual investors were actively investing in similar products in overseas markets, resulting in capital outflows.’,
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, ‘ For example, last May, CSOP Asset Management released a Samsung Electronics leverage product that attracted interest from local retail investors.’,
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, ‘ According to the Korea Securities Depository, the most net-purchased product by domestic investors on the Hong Kong stock market from January 1st to the 22nd of this year was an ETF (XL2CSOPSMSN) that tracks Samsung Electronics’ price movements by 2 times, totaling about 60.2 million USD.’,
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, ‘ The financial authorities plan to monitor the market situation when this product is launched.’,
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, ‘ An official remarked, “We need to see the long-term impact on the market,” adding, “We will actively review the situation and consider improvements if necessary.”‘,
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, ‘ Currently, authorities do not plan to expand the underlying assets beyond the two semiconductor stocks.’,
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, ‘ [email protected]’,
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