PPP floor leader calls for dismissal of presidential chief of staff over leveraged ETFs

The main opposition People Power Party floor leader Rep. Jeong Jeom-sig on Sunday called on President Lee Jae Myung to dismiss Presidential Chief of Staff for Policy Kim Yong-beom, holding him responsible for the listing of single-stock leveraged exchange-traded funds (ETF) that have fueled sharp stock price swings.

“The government is acting like it is running a stock tip chat room for the public,” he said at the party's Supreme Council meeting at the National Assembly on Monday. “The chief of staff for policy caused this problem, and the government cannot simply avoid responsibility with a few stopgap measures.”

Jeong took issue with Kim's remarks during a television interview Sunday defending the introduction of the leveraged ETFs, which track Samsung Electronics and SK hynix.

“Kim justified the products by saying they were introduced to foster the capital market and prevent investment funds from flowing overseas, even arguing that similar products exist in foreign markets,” said Jeong.

He argued that the comparison was misleading because Samsung Electronics and SK hynix account for more than half the market capitalization of the benchmark index.

“Under such exceptional market conditions, introducing leveraged ETFs was bound to amplify volatility,” he said.

“Since the products were launched in May, market safeguards had been triggered repeatedly through Thursday, with sidecars activated 18 times and circuit breakers five times.”

Jeong argued that investors' returns were roughly halved and that the resulting liquidity shocks affected even those who did not invest in the ETFs.

“All of this is the government's responsibility,” Jeong said. “The administration became carried away by the rise in the Kospi, treating it as its own achievement, and rushed through the introduction of leveraged products.”

Jeong further argued that the stock market had become “a gambling table where investors bet on sharp rises and falls,” adding that someone must be held accountable.

“President Lee should dismiss the chief of staff for policy Kim Yong-beom,” said Jeong. “If the president is serious about stabilizing the stock market, he should demonstrate that commitment through personnel decisions.”

Kim, meanwhile, said during a current affairs program on KBS 1TV on Sunday that the government would maintain the leveraged ETFs, noting that “investors had already committed more than 10 trillion won ($6.7 billion) to the products.”

Responding to the Financial Services Commission's recent decision to raise the minimum cash deposit requirement for trading the ETFs to 30 million won, Kim said “the measure was decided after extensive discussions by regulators and addressed many of the concerns that had been raised.”

Regarding the widening gap between an ETF's net asset value and its market price, Kim notified that “efforts by market makers to narrow the discrepancy within a 30-minute window could intensify selling pressure over a short period.”

“Further discussions are needed on how to minimize the market impact,” he said.

BY CHO MUN-GYU [[email protected]]