Progressive Civic Group Blasts Single-Stock Leveraged ETFs as Policy Failure Behind Kospi Volatility

"Belated fixes amount to shutting the barn door after the horse has bolted"

"Government fostered a high-risk investment climate, fueling volatility"

As the Kospi plunges, even a progressive civic group has blamed government financial policy for worsening market volatility.

The Citizens' Coalition for Economic Justice said in a statement on July 30 that the introduction of single-stock leveraged ETFs and ETNs should be regarded as a core policy failure behind the latest turmoil.

Repeated overly optimistic signals from the government, coupled with the creation of a high-risk investment environment, expanded investors' appetite for risk and increased market volatility, the group wrote.

It also criticized authorities for taking an overly complacent approach to swings far greater than those of ordinary ETFs, the potential for market shocks and risk management.

The group's statement said the government's decision to announce supplementary measures only after market volatility widened following the products' launch amounted to a belated response after the damage was done. It said that was little different from admitting authorities had overlooked the risks of single-stock leveraged products and rushed to introduce them.

It added that officials should swiftly carry out a thorough investigation into the rollout of single-stock leveraged products, take responsible follow-up steps, prepare temporary safeguards on short selling if needed, and move quickly on broader market-stabilization measures including for the Kosdaq market.

Kim Hee-seon, Hankyung.com reporter, gimme_sun@hankyung.com