The leverage 'balloon effect'... a barrier only for Samsung Nikko, what about the 'index ETF' bias?

The recent introduction of regulations on single-stock leverage products, such as Samsung Electronics and Escape (ESK) Hi-Kins leveraged funds, has resulted in an "inflation effect," causing investors to shift their funds to other types of leveraged products. To prevent this, a suggestion has been made for a consistent regulatory framework for all leveraged products.

Researcher Eui-seop Choi of the Capital Markets Research Institute stated that the application of slightly stricter regulations to specific products can lead to a "balloon effect," with investment flowing to other types of leveraged products. He recommended strengthening entrance regulations for all leveraged products, managing the overall leverage product ratio within a certain level, and reviewing entrance regulations for high-risk leveraged products as well.

After the implementation of regulations, the daily turnover of single-stock leveraged products declined significantly, from 12.4 trillion won on July 30th last month to 6 trillion won on October 10th, while the daily trading volume of other leveraged products increased. For instance, the trading volume of the "KODEX KODEX150 Leveraged" fund, which follows the daily returns of the KOSPI 150 index twice, saw a 49.8% increase from 7.91 trillion won over seven trading days in July 22-30 to 5.68 trillion won over seven trading days in July 31-August 10.

The researcher also noted the need to improve individual comprehensive asset management accounts (ISAs) and pension systems to regulate credit facilities and leverage ETF net asset values, preventing market instability and promoting long-term diversified investment.