FSS issues urgent warning on volatility from single-stock leverage
The Financial Supervisory Service 6 month 17 day held an urgent market review and meeting, diagnosing that single-stock leverage and increased credit provision had heightened stock-market volatility. The Bank of Korea also 6 month 18 day referred to a shift in the monetary-policy stance of major countries and warned that increased volatility warranted attention.
The Financial Supervisory Service 6 month 17 day conducted an urgent market review. The reason was that volatility had risen since the introduction of single-stock leverage.
The FSS held an urgent meeting on the same day. It raised concerns about a surge in credit provision and forced liquidation.
Recently, the market saw what is known as “debt-financed investing,” in which investors borrow money to invest in leveraged products. Concerns were raised that single-stock leveraged products had triggered short-term trading.
The Financial Supervisory Service said it would continuously monitor domestic and overseas risk factors. It said it was still difficult to reach a conclusion on the possibility of an outflow from the stock market due to foreign selling.
The Bank of Korea 6 month 18 day, referring to a shift in the monetary policy stance of major countries, urged caution over increased market volatility.
In connection with the sale of Lotte Insurance, the double leverage ratio of financial holding companies was identified as a factor that could determine the outcome. This ratio affects sale negotiations and assessments of financial soundness.
Market experts pointed out that single-stock leveraged products had increased trading concentration and amplified volatility. As concerns about potential losses grew, the Financial Supervisory Service announced measures to protect investors and strengthen monitoring.
The Financial Supervisory Service said it would strengthen supervision and consider additional measures to prevent investor losses. Relevant authorities and financial companies agreed to share information on future disclosures and the status of risk management.