Government to Strengthen Regulations on Leverage Products Amid Market Decline
The South Korean government is set to tighten regulations on single-stock leverage products, which have been identified as a contributing factor to the recent stock market decline. Measures will include setting individual investment limits to prevent excessive concentration of funds in specific products, as well as imposing transaction costs and mandating simulated trading to curb excessive trading activity.
On July 29, Deputy Prime Minister and Minister of Economy and Finance Ku Yun-cheol convened an emergency market situation assessment meeting with key officials, including Bank of Korea Governor Lee Hyun-sung, Financial Services Commission Chairman Lee Ok-won, and Financial Supervisory Service Chairman Lee Chan-jin, to discuss recent trends in domestic and international financial markets and potential responses.
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 decline was exacerbated by adjustments following previous surges, weakened investor sentiment, and supply-demand instability.
However, they clarified that this downturn does not stem from a deterioration in the fundamental strength of the South Korean economy. Exports of key items, such as semiconductors, remain strong, and the outlook for operating profits of KOSPI-listed companies has been revised upward, alongside an expanding current account surplus. They emphasized the need to guard against excessive panic in the market.
The government plans to maintain a high level of vigilance and activate a 24-hour monitoring system in collaboration with relevant agencies. They will implement additional measures immediately, particularly in response to the increased volatility in the stock market caused by the concentration of funds in single-stock leverage products.
To manage the scale of investments in single-stock leverage products, the government is considering setting individual investment limits, proposing a cap of 20% of an individual's total investment amount for these products. Additionally, they are reviewing the introduction of a burden fee, currently applied in the futures market, to single-stock leverage products to deter excessive trading behavior.
Korea Pursues Joint Development of Next-Generation Civil Aircraft
South Korean companies are moving beyond supplying aircraft parts to participate in the joint development of next-generation civil aircraft. Hyundai Motor Group plans to expand its collaboration into eco-friendly energy sectors, including hydrogen and small modular reactors (SMRs), based on local production capabilities.
On July 28, during a Korea-Brazil business roundtable held in São Paulo, seven memoranda of understanding (MOUs) were signed in areas such as aerospace, critical minerals, and AI healthcare.
The most notable area of focus is the next-generation civil aircraft. Brazilian company Embraer is considering expanding its business from small to medium-sized aircraft, specifically from 70-120 seat models to 150-200 seat models. Korea Aerospace Industries (KAI) and Korean Air are discussing the possibility of joint development with Embraer through separate negotiations.
KAI has also signed an MOU with Embraer for collaboration in the civil aircraft and aerospace sectors. KAI currently supplies wing structures for civil aircraft and electric vertical takeoff and landing (eVTOL) structures, while Korean Air provides fuselage and components. Both companies plan to expand their roles beyond parts supply to include participation from the design and development stages.
Ruling Party Pushes for Abolition of Supplementary Investigation Rights
On July 29, a bill to abolish supplementary investigation rights and a proposal to shorten the fast-track period for legislative processes passed through the National Assembly's Legislation and Judiciary Committee and the Operations Committee. As these bills are set to be presented and processed in the plenary session on July 30, the ruling People Power Party plans to use unlimited debate (filibuster) to block them.
The Legislation and Judiciary Committee and the Operations Committee held full meetings on the morning of the same day to begin reviewing the bills, ultimately approving the amendments to the criminal procedure law and the National Assembly Act.
Initially, the amendment to the criminal procedure law was scheduled to be submitted to the plenary session through the full meeting of the Legislation and Judiciary Committee. However, members of the People Power Party protested against the Democratic Party's push, leading to the referral of the bill to the agenda coordination committee.
After passing through the agenda coordination committee, the amendment to the criminal procedure law is now set to be presented to the plenary session under the Democratic Party's leadership for a vote.
'Black Wednesday' Reality: SK Hynix Reports Record Earnings Amid Market Collapse
Following 'Black Tuesday,' 'Black Wednesday' has become a reality. Despite SK Hynix reporting record earnings, it was insufficient to revive investor sentiment. A sharp decline in U.S. semiconductor stocks and disappointing earnings expectations led to a widespread sell-off in domestic semiconductor stocks, causing both the KOSPI and KOSDAQ indices to drop by over 10% during trading.
On July 29, the Korea Exchange reported that the KOSPI closed at 5,663.24, down 360.42 points (5.98%) from the previous trading day. The index opened at 6,089.11, up 65.45 points (1.09%), but quickly reversed its gains and fell sharply. The KOSDAQ index also opened at 713.71, up 7.86 points (1.11%), but soon turned downward, closing at 662.68.
As the decline continued, the KOSPI market triggered its 15th and this year's 9th first-stage circuit breaker. The KOSDAQ market also activated its 14th and this year's 4th first-stage circuit breaker. This marked the first time both markets experienced simultaneous circuit breaker activations for two consecutive days.
Earlier that day, SK Hynix reported a record second-quarter consolidated revenue of 79.3187 trillion won and an operating profit of 60.5426 trillion won. Despite these record figures, the results fell slightly short of market expectations, failing to revive frozen investor sentiment. Consequently, SK Hynix's stock price plummeted by 9.61%, while Samsung Electronics also saw a 5.23% decline, leading to a broader sell-off in major semiconductor stocks.
Bill Gates Plans Visit to South Korea Next Month for AI and Nuclear Cooperation Talks
Bill Gates, co-founder of Microsoft, is reportedly planning to visit South Korea as early as next month. If the visit occurs, discussions on cooperation in artificial intelligence (AI) and next-generation nuclear power are expected to be key agenda items.
According to the information and communication technology (ICT) industry on July 29, Gates' representatives have recently communicated with Prime Minister Han Sung-soo to arrange a meeting and coordinate the schedule and agenda. Specific details regarding the visit and meetings have yet to be finalized.
During his previous visit to South Korea last year, Gates met with government officials and business leaders to discuss potential collaborations in AI and small modular reactors (SMRs). He engaged in discussions with prominent figures, including SK Group Chairman Chey Tae-won, HD Hyundai Chairman Chung Ki-sun, and Samsung Electronics Chairman Lee Jae-yong, exploring opportunities for cooperation in nuclear power, biotechnology, and AI.
If this visit materializes, it is anticipated that discussions on advanced industrial cooperation will resume from where they left off last year.
* This article has been translated by AI.
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