The government is set to strengthen regulations on single-stock leverage products, which have been identified as a cause of the recent stock market decline. Measures will include setting individual investment limits to prevent excessive concentration of funds in specific products and imposing trading costs to curb excessive trading.
Deputy Prime Minister and Minister of Finance Koo Yun-cheol convened an emergency market situation monitoring meeting on July 29 at the Government Seoul Complex, attended by Bank of Korea Governor Lee Hyun-sung, Financial Services Commission Chairman Lee Ok-won, Financial Supervisory Service Chairman Lee Chan-jin, and Chief Economic Growth Secretary Ha Jun-kyung, to discuss recent trends in domestic and international financial markets and response strategies.
Participants in the meeting assessed that the recent stock market downturn was significantly influenced by intensified competition in memory semiconductors from China and concerns over funding for major U.S. tech companies. They noted that the adjustment following previous surges, along with weakened investor sentiment and supply-demand instability, contributed to the market's decline.
However, they clarified that this downturn does not stem from a deterioration in the fundamental strength of the economy. They emphasized that strong export performance in key sectors like semiconductors continues, and the outlook for operating profits of KOSPI-listed companies has been revised upward, alongside an expanding current account surplus, indicating that excessive panic should be avoided.
The government will maintain a high level of vigilance and activate a 24-hour monitoring system in collaboration with relevant agencies. They believe that the concentration of funds in single-stock leverage products is exacerbating market volatility and will implement additional measures immediately.
To manage the scale of investments in single-stock leverage products, the government plans to set individual investment limits, proposing a cap of 20% of an individual's total investment amount for these products. They are also considering applying the excessive trading fee currently in place in the futures market to single-stock leverage products to curb excessive trading behavior.
Investor protection measures will also be strengthened. The existing pre-education program will include simulated trading, and in rapidly changing market conditions, the financial authorities will be legally empowered to adjust leverage ratios, referencing systems like Hong Kong's variable leverage system to stabilize the market.
The previously announced supplementary measures for single-stock leverage products will proceed as planned. Starting July 31, a basic deposit requirement of 30 million won will apply to investments in domestic and foreign single-stock leverage products, affecting both new investors and existing investors making additional purchases. The duration of investor education will be extended from two hours to three hours, and the responsibility for managing discrepancies will be reinforced for securities firms and asset management companies. The trading unit will be expanded from one to a provisional 20 units starting in November.
Additionally, the government will swiftly advance structural reform tasks aimed at enhancing corporate value and governance of listed companies, as well as improving the KOSDAQ market, to establish a fundamental market stability framework.
Recently, the domestic stock market has experienced significant declines, particularly in the semiconductor sector, due to intensified competition from China and concerns over funding for major U.S. tech companies. The KOSPI fell by 10.84% on July 28 and dropped another 5.98% on July 29. As of July 28, the KOSPI's decline was 28.9% compared to the end of June, surpassing declines in major stock markets in the U.S., Europe, Japan, China, and Taiwan.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.