The South Korean Presidential Office recommends a comprehensive review of the Korean capital market, including leveraged ETFs.

According to BlockBeats, on July 29, the Chief of Policy Office at the South Korean Presidential Office, Kim Yong-beom, systematically responded to the recent sharp decline of the KOSPI index. He pointed out that the current market is undergoing an internal debate regarding AI investment—on one hand, there are doubts about the commercial sustainability of large-scale capital expenditure by big tech companies, “semiconductor supply continues to increase, but there is a lack of confidence over whether future demand can keep up”; on the other hand, the rapid catch-up of China’s semiconductor industry is causing new competitive pressures. News such as the listing of Changxin and breakthroughs in Chinese lithography equipment manufacturing technology have led the market to re-examine whether South Korea’s memory chip competitive advantage remains solid. However, Kim Yong-beom emphasized that AI demand is not temporary, stating that “demand will remain robust and persistent.” He believes South Korea should use this opportunity to accelerate factory construction, invest timely, and strengthen R&D input.

Regarding the causes of amplified volatility in the South Korean domestic market, Kim Yong-beom clearly stated that leveraged ETF is not the only answer. The market structure, with semiconductor and AI-related stocks accounting for as much as 40% to 50%, coupled with the high proportion of derivatives and ETFs and the makeup of investors, together lead to significantly higher volatility compared to overseas markets. Although leveraged ETFs may have a temporary impact on the market during end-of-day rebalancing, sometimes volatility occurs in the morning, which, based on the time distribution, alone is enough to rule out leveraged ETFs as the sole driving factor. Kim Yong-beom recommended that the Financial Services Commission of Korea conduct a comprehensive review of the overall capital market structure, including leveraged ETFs.