Kim said the Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) would examine why volatility in South Korean equities tends to be unusually high, while rejecting claims that single-stock leveraged exchange-traded funds (ETFs) introduced by the government this year were solely responsible for the recent market turbulence.
He admitted that those ETFs could intensify market swings but argued it would be inappropriate to blame them entirely for the recent volatility. He then attributed the initial sell-off partly to global uncertainty over whether heavy investment in artificial intelligence would generate sufficient returns and whether semiconductor demand could remain resilient.
Kim also cited the Shanghai debut of China's ChangXin Memory Technologies earlier this week and advances in Chinese lithography technology as factors fueling concerns over the long-term competitiveness of Samsung Electronics and SK hynix.
The KOSPI closed 10.84 percent lower at 6,023.66 on Tuesday, its steepest daily fall since March 4, while SK hynix tumbled 14.7 percent and Samsung dropped 14.4 percent.
The two chipmakers accounted for more than half of the benchmark's value, amplifying the impact of the global semiconductor sell-off on the broader Asian market.
Kim's attempt to downplay their market impact still faces scrutiny over the government's hasty introduction of such high-risk ETFs and subsequent measures to restrict investment in them.
The market value of some 16 single-stock leveraged and inverse ETFs surged from 4.4 trillion won when they became available on May 27 to 11.9 trillion won by July 15, about seven weeks later, according to the FSC. Their trading volume reached 8.29 trillion won as of Tuesday, accounting for 34.2 percent of total ETF turnover.
Amid overheated trading, the FSC and FSS came up with measures on July 16, suspending new listings and advertisements. They also decided to raise the minimum cash deposit required for new or additional purchases of domestic and overseas single-stock leveraged ETFs and exchange-traded notes from 10 million won to 30 million won, starting from July 31.
The FSC has also asked asset managers to spread rebalancing trades throughout the session rather than concentrating them near the close, reflecting concerns that mechanical trading around the closing price could further amplify market volatility.
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