Financial watchdog chief expresses concern over single-stock leveraged ETFs

SEOUL, June 22 (Yonhap) -- The chief of the country's financial watchdog said Monday that the newly introduced single-stock leveraged exchange-traded funds (ETFs) has been generating many side effects, and his agency is drawing up measures to protect investors.

In a press conference, Lee Chan-jin, governor of the Financial Supervisory Service (FSS) said the overheated rush to the single-stock leveraged ETFs with underlying assets -- Samsung Electronics and SK hynix -- have shown extreme turnover since their introduction in late May.

"I am seriously worried that players won't have any meaningful gains, while only management-and-operation entities are benefiting from profits," Lee said.

The FSS chief said his agency is reviewing measures to buffer potential adverse impacts on investors.

Underlying assets -- Samsung Electronics and SK hynix -- have been delivering increased volatility on the back of an artificial intelligence (AI)-driven rally, which in turn leads to amplified volatility for single-stock leveraged ETFs.

According to the FSS, the market capitalization of single-stock leveraged ETFs stood at 4.5 trillion won (US$2.95 billion) on May 27, when they debuted on the local stock market.

But their market value more than doubled to 9.6 trillion won on June 12.

Also, their daily turnover rate stood at 122.5 percent, far higher than the 30.2 percent posted by other leveraged, inverse ETFs, according to the FSS.

The watchdog said underlying assets could show extreme volatility down the road, resulting in amplified volatility for single-stock leveraged ETFs.