Retail Influx Into Leveraged ETFs Sparks Regulatory Alarm; South Korea Urgently Postpones Single-Stock Options; Samsung Launches Massive Buyback to Stabilize Price

TradingKey - On June 24, Seoul time, South Korea postponed the weekly options launch for individual stocks, including SK Hynix and Samsung Electronics, which was originally scheduled for June 29; on the same day, Samsung Electronics stated that it is considering repurchasing approximately 90 trillion won worth of shares to distribute as employee bonuses.

Single-stock weekly options postponed

People familiar with the matter said that South Korea has postponed its weekly options program for individual stocks, such as SK Hynix and Samsung Electronics, which was originally scheduled to launch on June 29. A representative from the Korea Exchange stated that "no decision has been made yet." The immediate backdrop for the postponement is regulatory concern over the out-of-control size of single-stock leveraged ETFs.

The 16 leveraged ETFs tracking Samsung Electronics and SK Hynix launched at the end of May initially had total assets of approximately $3 billion, which has since grown to about $9.1 billion, with retail investors making up around 92% of the holders.

Lee Chan-jin, Governor of South Korea's Financial Supervisory Service, expressed "deep regret" at a press conference on June 22 for greenlighting these products in the first place, stating that "this only benefits securities firms" and worrying that "it will turn into a casino." He also pointed out that the turnover rate of the leveraged ETFs reached 200% at one point during sharp declines, with transaction fees paid by investors ranging from 5 trillion to more than 10 trillion Korean won.

At the press conference, Lee Chan-jin admitted: "The stock market had already risen significantly when the ETFs were listed. We had doubts, but ultimately failed to stop them."

Samsung Share Buyback

Samsung Electronics stated in a regulatory filing that it is considering a share buyback to pay bonuses. The timeline and scale have not yet been finalized, and a separate announcement will be made within a month at the latest. According to previous reports, the buyback amount is expected to approach 90 trillion won.

Samsung had previously reached an agreement with the labor union to distribute special performance bonuses in the form of company shares. The after-tax value is estimated to be approximately 93 trillion won.

Boosted by the buyback news, Samsung Electronics shares surged nearly 10% in morning trading on June 24, closing up 9.84% at 340,500 won, reclaiming its position as South Korea's most valuable listed company.

[Source: TradingView]