President Lee Jae-myung recently instructed for prompt institutional improvements regarding single-stock leveraged exchange-traded funds (ETFs), which have been identified as a factor in recent volatility in the domestic stock market.

President Lee stated at a State Council meeting held at the Blue House on the 21st that regarding single-stock leveraged ETFs, "supplementary measures must be prepared swiftly and thoroughly."

Regarding the introduction of 2x leveraged ETFs targeting Samsung Electronics and SK Hynix, he mentioned that "there are conflicting assessments—one analysis suggests there was an effect in reducing foreign exchange outflows, while another suggests it deepened instability in the stock market."

▲ Financial Services Commission: "Aimed at Investor Protection and Capital Market Advancement"

Financial Services Commission Chairman Lee Eok-won explained that the product was introduced in consideration of the situation where leveraged products based on Korean stocks are being traded overseas.

He emphasized that this was a necessary measure in terms of protecting domestic investors and advancing the capital market, and also stated that there was an aim to reduce fund outflows to overseas products.

▲ "It is a Fact That Domestic Investors' Complaints Have Increased"

President Lee pointed out that apart from the policy's intention, the market's reaction should be taken seriously.

He stated, "In any case, it is a fact that it has become a cause of complaints among domestic investors," and emphasized that even if the policy had some effect, if investors perceive it as a cause of enlarged losses, this cannot be overlooked.

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▲ "Investor Perception More Important Than Exchange Rate Stabilization Effect"

President Lee acknowledged that the government pursued the policy for exchange rate stability, while noting that investors' perspectives may differ.

He stated, "The authorities may have aimed for the policy effect of exchange rate stabilization, but it is not a situation where citizens should have to consider such factors," emphasizing the need to pay greater attention to the actual market impact that investors experience rather than the macroeconomic effects of the policy.

▲ Additional Response Ordered Beyond Existing Supplementary Measures

He instructed that more active response is necessary regarding the supplementary plan for single-stock leveraged ETFs recently announced by financial authorities.

President Lee stated, "There are also suggestions that this alone won't suffice," and instructed, "Take necessary responsive measures swiftly and boldly."

This was interpreted as emphasizing that more effective follow-up measures are needed to restore market confidence.

▲ "Timing of Introduction Also Amplified Market Anxiety"

President Lee also mentioned that single-stock leveraged ETFs themselves should not be solely blamed for the problem.

He said, "After the sharp rise phase, when the product was introduced at the peak point as the market was adjusting, there is an optical illusion effect as if the problem became more severe because of this."

He further urged that since market volatility is a result of multiple factors working in combination, policy evaluation should also comprehensively consider various elements.

▲ Government "Confirms Effect of Reduced Foreign Exchange Outflows"

Policy Coordinator Kim Yong-beom also explained the positive effects of introducing single-stock leveraged ETFs.

He stated that Korea's overseas securities investment reached 140 billion dollars last year, with individual investors accounting for approximately 40 billion dollars, imposing considerable pressure on the exchange rate.

In contrast, he explained that this year through June, individual overseas securities investment reached only 2.8 billion dollars, showing an effect in reducing capital outflows.

▲ "Policy Achievement and Investor Damage Are Separate Issues"

President Lee reiterated that policy effects and investor perception should be approached separately.

He stated, "That is a matter regarding the government's policy effect," but added, "Stock market participants might think they suffered damage because the decline became larger due to this product, don't they?"

He repeatedly emphasized, "In any case, it is our responsibility to create supplementary measures," urging the preparation of follow-up measures to restore investor confidence.