South Korean Policy Chief Kim Yong-beom said the government cannot delist single-stock leverage ETFs tracking Samsung Electronics and SK Hynix.
This decision prevents a potential market crash by protecting investors and maintaining stability in high-volume financial instruments. Because these specific funds have grown to a massive scale, a sudden removal from the exchange would trigger widespread panic and financial loss.
Kim said during a broadcast appearance on KBS that he addressed the challenges of managing these leveraged products. He said that delisting is difficult to imagine given the current market conditions.
According to Kim, the total scale of these single-stock leverage ETFs has already reached more than 10 trillion won [1]. He said that such a large volume means that delisting would cause an enormous shock to the market [1].
Rather than removing the funds, the government is focusing on technical stability. Kim said the priority must be to minimize the tracking error, or the gap between the ETF's price and its actual net asset value [1].
Reducing this discrepancy is seen as the primary method for protecting investors while keeping the products available for trade. This approach allows the market to maintain liquidity without risking the systemic instability that would follow a forced liquidation of 10 trillion won in assets [1].
“"Delisting is difficult to imagine."”
The decision to maintain these ETFs despite their risks indicates that the South Korean government prioritizes systemic stability over the theoretical dangers of leveraged trading. By focusing on minimizing the tracking error rather than delisting, the administration is attempting to professionalize the management of these high-risk instruments to avoid a liquidity crisis that could destabilize the broader KOSPI market.
