SpaceX OptionBREAKING: The South Korean Ministry of Economy and Finance has just restricted single-stock leveraged ETFs.
Here are the changes:
1. The investment limit for individuals in these products is capped at 20% of total invested assets.
2. Trading costs will increase to curb excessive trading.
3. New training requirements have been added for investors.
4. Regulators are preparing legal powers to stabilize markets in emergencies, similar to rules used in Hong Kong.
5. Deposit requirements have been raised to 30 million KRW, effective Friday, July 31.
This comes after the KOSPI plummeted by -20% in just two days.
🇰🇷 The South Korean stock market crashed so severely that the government had to set up suicide prevention hotlines.
The KOSPI plummeted by -20% over the past two trading days.
South Korean retail investors heavily borrowed margin loans and single-stock leveraged ETFs to chase this year's rally, but now the same leverage effect is rapidly wiping them out on the way down.
The single-stock leveraged ETF for SK Hynix alone plunged 32% today. Individual investors panic-sold stocks worth over 2 trillion won today, trying to exit before losses widened further.
Forced liquidations from these leveraged bets wiped out 2.3 trillion won in just two and a half months. Once losses exceed loan coverage, retail accounts are automatically shorted.
This is exactly why the Financial Services Commission will launch a debt consultation hotline nationwide in October, formally as part of the 'Economic Crisis Family Suicide Prevention Program,' directly responding to the debt crisis caused by such leverage.
The KOSPI dropped from the world's sixth-largest stock market to the eleventh in just one month.
Nine circuit breakers have been triggered so far this year, compared to only 15 in the exchange's entire 26-year history.
The 2008 global financial crisis saw the KOSPI fall 57%, but it took 371 days.
Fed rate hikes and the COVID crash saw it fall 44% over 784 days.
This crash has already reached 43% in just 40 days.
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