South Korea panel backs dropping ETF label as chip-stock leveraged products plunge

South Korean regulators and lawmakers are tightening controls on single-stock leveraged and inverse products tied to Samsung Electronics and SK Hynix after severe volatility, back-to-back circuit breakers and heavy retail losses. Measures include dropping the ETF label from product names, a 30 million won cash-only minimum deposit effective July 31, temporary suspensions of new listings and advertising, stronger pre-trade education, tighter tracking-error controls, and changes to rebalancing and liquidity provision. The policy push intensified as single-stock leveraged funds linked to the two chipmakers plunged again on July 29 while inverse 2X products rallied. National Assembly data showed turnover in related inverse ETFs reached 989.8% over 50 trading days, with combined leveraged and inverse trading of 402.0882 trillion won from May 27 to July 14. At a hearing, politicians also criticized the products as encouraging speculative trading; Bloomberg ETF analyst Eric Balchunas said on X that People Power Party lawmaker Lee Jongwook called the market a "casino" and a policy failure, and argued South Korea may be ill-suited for 2x single-stock ETFs because relatively low stock liquidity can let derivatives influence the underlying shares more directly.