The government's decision to implement investment regulations on single-stock leveraged exchange-traded funds (ETFs) earlier than planned is expected to reduce repeated ultra-short-term trading, an analysis found. However, another analysis was raised alongside it, noting that concentration of funds into Samsung Electronics (005930.KS) and SK hynix (000660.KS) remains, meaning concerns over market volatility will continue for the time being.
According to the financial investment industry on the 28th, Meritz Securities pointed out in a report that "the increase in the basic deposit requirement (from 10 million won to 30 million won) and the measure disallowing substitute securities, both scheduled to take effect on the 31st, will have a significant impact on reducing trading turnover." On the 24th of this month, the government moved up the implementation timing of measures to supplement single-stock leveraged products, including the strengthened basic deposit requirement, from an initial target of sometime in August to the 31st of this month.
Previously, when calculating deposits, not only cash in the account but also 70% of the market value of substitute securities such as stocks, ETFs and bonds was included in the basic deposit. From the 31st, however, this will no longer be recognized. In addition, on the day stocks are sold (T-day), the proceeds will not be recognized as cash deposits and will be reflected only on the actual settlement date (T+2). As a result, even if an investor buys and sells stocks or ETFs with 30 million won in cash on the same day, they will not be able to purchase single-stock leveraged products again until the settlement date unless they deposit additional cash.
The researcher analyzed that changes have already been detected in the market since the regulation was announced. According to the explanation, since the 16th of this month, when financial authorities announced the supplementary measures, the pace of increase in the number of listed single-stock ETF shares has slowed and trading turnover has fallen from the previous week. In fact, the turnover of SK hynix single-stock ETFs decreased from 179% to 146%, while that of Samsung Electronics single-stock ETFs fell from 45% to 38%. However, the researcher assessed that the trading value of SK hynix single-stock ETFs still exceeds the level of their market capitalization.
According to Meritz Securities, since the listing of single-stock leveraged products, the KOSPI has fallen 16.9%, and 26.6% from its peak. The KOSPI's trading value in the previous week was 27.4 trillion won, down 15.8 trillion won from the average of the preceding 20 trading days (43.3 trillion won). In particular, the trading value of single-stock ETFs was found to be on par with the entire KOSPI trading value excluding Samsung Electronics and SK hynix.
Credit trading is also concentrating in large semiconductor stocks. The KOSPI's credit loan balance stood at 25.8 trillion won, down 3.9 trillion won from its peak (29.7 trillion won), but the point was made that the proportion held by Samsung Electronics and SK hynix has actually expanded. The researcher analyzed, "When the concentration of funds into a particular stock reaches an overheated level, shocks unrelated to fundamentals can occur on the other side," adding, "In a phase where market liquidity declines, the likelihood of a widening gap between fundamentals and prices is also high."
Meanwhile, the day before, the Democratic Party's K-Capital Market Special Committee held a meeting with heads of major asset management firms and brokerages at the Korea Financial Investment Association in Yeouido, Seoul, to discuss the operational status of single-stock leveraged products and investor protection measures. At the meeting, discussions reportedly moved toward not using the term ETF for such products and strengthening self-regulation by guarding against excessive exaggerated advertising.
