South Korea Considers Additional Curbs on Single-Stock Leveraged ETFs After Market Volatility

Sheewon Min

South Korea’s financial authorities are considering additional restrictions on single-stock leveraged exchange-traded funds (ETFs) following sharp market volatility that prompted an emergency meeting among top economic policymakers. The discussions came after a steep decline in shares of SK Hynix, one of the country's largest semiconductor companies, heightened concerns about speculative trading and broader market stability.

Finance Minister Koo Yun-cheol met with the heads of the country’s financial regulators to review potential measures aimed at reducing excessive risk-taking by retail investors. Among the proposals under consideration is limiting single-stock leveraged ETFs to no more than 20 percent of an individual’s investment portfolio, although officials emphasized that no final decision has been made on the specific threshold.

Regulators are also reviewing measures that would increase the financial responsibility of brokerage firms involved in facilitating high-risk trades. Another proposal would require investors to complete simulated trading before gaining access to single-stock leveraged ETFs, complementing the existing mandatory education program. Authorities additionally plan to establish a clearer legal framework that would allow market stabilization measures to be activated during emergencies linked to these highly leveraged products.

Several regulatory changes have already been scheduled. Beginning Friday, the minimum cash deposit required to invest in single-stock leveraged ETFs will increase from 10 million won to 30 million won. The mandatory investor education program will also be expanded from two hours to three hours in August. From November, investors will only be permitted to trade these ETFs in batches of 20 shares, a measure designed to reduce excessive turnover and speculative short-term trading.

Officials noted that recent market volatility has not been driven solely by leveraged ETFs. They pointed to intensifying competition in the global memory chip industry, particularly from emerging Chinese rivals, as well as concerns surrounding fundraising by major U.S. technology firms. Despite these pressures, policymakers stressed that South Korea's underlying economic fundamentals remain sound and cautioned investors against overreacting to short-term market fluctuations.

While leveraged ETFs can amplify market swings and expose inexperienced investors to substantial losses, overly restrictive regulations may also reduce market liquidity and limit legitimate investment strategies. Strengthening investor education and ensuring that participants fully understand the risks are sensible first steps. However, regulators should continue monitoring whether the new rules effectively reduce excessive speculation without discouraging informed investors or undermining the competitiveness of South Korea’s financial markets.

South Korea Completes KF-21 Fighter Jet Development 

Amy Han

South Korea has successfully completed the development of the KF-21, its first domestically designed fighter aircraft, representing a significant step in advancing the nation's defense capabilities and expanding its indigenous aerospace industry.

According to the state-run Defense Acquisition Program Administration (DAPA), the 8.8 trillion won (approximately $6.04 billion) development program reached completion. With development finalized, the Republic of Korea Air Force is expected to receive its first operational KF-21 fighter in September. Development of the KF-21 began in 2015 as part of South Korea's effort to replace its aging fleet of U.S.-built F-4 Phantom and F-5 Tiger fighter jets with a modern, homegrown alternative.

After the first prototype was introduced in 2021, the aircraft successfully passed its final combat suitability evaluation in May by satisfying all required operational performance standards. DAPA also reported that the KF-21 completed more than 1,600 flight tests without experiencing a single accident during the testing phase.

DAPA Minister Lee Yong-cheol credited the achievement to the dedication of the engineers and technical teams involved in the project, while also acknowledging the public's confidence in South Korea's technological expertise. He described the KF-21's successful development as a remarkable accomplishment made possible through their hard work and continued support.

The KF-21 represents South Korea's first domestically developed supersonic fighter aircraft and is the result of sustained commitment from multiple administrations across the political spectrum, both conservative and progressive, that prioritized long-term national defense capabilities. The current Lee Jae-myung administration has an opportunity to continue that legacy by investing in sixth-generation fighter technology for future generations. One key initiative is the "Korean-style next-generation stealth fighter" research program, which the Agency for Defense Development formally began this year and is expected to provide the technological groundwork for the country's future combat aircraft. 

This Week in Korean History

On Aug 5, 1952, President Rhee Syng-man, was reelected for a second term.