Lee Chan-jin, head of the Financial Supervisory Service, said on the 22nd that the recent overheating of leveraged exchange-traded funds (ETFs) for single stocks of Samsung Electronics and SK Hynix is “leading to the result that only securities companies are enriched,” and that he is preparing investor safety measures.
Regarding the debt investment (investment by borrowing) craze, we were wary of the 'statistical illusion' that reduces the perceived value as the ratio of credit transaction loan balance to market capitalization decreases due to the increase in stock market market capitalization.
At a regular press conference held at the head office in Yeouido, Seoul this morning, Director Lee said of the recent stock market, "Market instability and volatility have become very severe due to the rapid increase in trading turnover," and added, "In particular, the concentration of transactions centered on semiconductor stocks is expanding."
He continued, “Although borrowed investment has also greatly expanded, an ironic phenomenon has occurred as the market capitalization rises and the proportion (of the total market capitalization of credit loan balances) decreases, making it less tangible,” adding, “We are monitoring it carefully to avoid being buried in the illusion of statistics, and it is true that we are looking at it seriously.”
In particular, Director Lee expressed strong concerns about the overheating of investment in Samsung Electronics and SK Hynix single-stock leveraged ETFs. This system was introduced at the end of last year as the high exchange rate continued to induce Seohak Ant's overseas stock market investment demand to the domestic stock market.
Director Lee said, “The extreme turnover rate of the product in question is resulting in only the securities companies benefiting,” and added, “I am personally very concerned that only the management and operation system benefits while the players do not benefit.”
He said that when the product's turnover rate was high, it was close to 200%, and estimated that the trading commission that securities firms could take through this would be as much as 10 trillion won.
Director Lee said, "Recently, the Financial Supervisory Service issued a related consumer warning, but there is no 'cooling down'. Most investors are middle class and working class, but stock market volatility could be a big shock to households, so we are considering separate safety measures."
Specifically, he said, "We are looking at areas that can alleviate external shocks in the credit-related area," and "We will consider with the policy authorities what to do in each stage from receivables to credit."
When asked whether the single-stock leveraged ETF had the effect of alleviating high exchange rates as intended, he said, "It is true that it was prepared in a hurry at the time," and added, "As a measure to get feedback from Hong Kong (investment demand for similar products listed on the stock market), the effect did not seem to be very good. On the other hand, the side effects have become so great that the government is actually worried about it," effectively admitting the policy's failure to be effective.
Regarding the recent failure of Mirae Asset Securities [006800] to allocate Space However, the details of the assignment being tested were not disclosed.
He continued, "It is a very inconvenient and dissatisfying situation from the investor's perspective. (If I had not invested in the public stock subscription), I would have bought the stocks on the first day of listing, but the money was buried (in the public stock subscription)," he said. "I will share the results of Mirae Asset Securities' inspection to prevent a recurrence related to investor protection."
The Financial Supervisory Service plans to begin an on-site inspection during the week of Korea Investment Trust Management, which advertised that it would incorporate Space
In the case of Hantu Management, it promoted the inclusion of public offering stocks, which were expected to generate relatively higher returns than incorporating stocks after listing, but was ultimately unable to include public offering stocks due to Mirae Asset Securities' failure to allocate public offering stocks. When Samsung Management included Space
Regarding the foreign exchange market, he said, "Uncertainty has been somewhat alleviated by the interim agreement between the United States and Iran," but added, "It is true that market instability factors such as inflationary pressure due to high oil prices and interest rate hikes in Korea and major countries are expected to remain."
Regarding the high exchange rate issue, he explained, "The problem is related to foreign exchange supply and demand. It is not a country that lacks foreign currency at all." The diagnosis is that the current high exchange rate is not due to a shortage of foreign currency, but is a phenomenon caused by a mismatch between dollar supply and demand.
In response to a question about the possibility of the Financial Supervisory Service relocating to a local area, he said, "If the situation (relocating to a local area is confirmed), we can reveal our position," but added, "From the perspective of the general public, (the relocation of the Financial Supervisory Service to a local area) is strange. The awareness of the question of where the field supervisor of the construction board will go is still valid."
