SEOUL: An onerous mock trading course is becoming an effective tool for South Korea to cool investor fervour over risky products that have turned the country’s US$4.3 trillion stock market extremely volatile.
Leveraged exchange-traded funds (ETFs) targeting twice the daily returns of chipmakers Samsung Electronics Co and SK Hynix Inc have seen their trading value collapse to 4% of its June peak and are set for their first monthly outflow.
Key to sapping demand has been a series of regulatory tightening moves, most recently a rule to complete five-day simulated trading.
Investors must download a Windows-only programme on PCs and spend at least an hour a day learning the ropes – and the risks – of leveraged trading with virtual cash.
Interviews with several South Korean retail investors suggest the new requirement, effective Aug 19, is too cumbersome to meet.
When Kim Jung-hoon, a 41-year-old resident of Gyeonggi province outside Seoul, heard about the mandatory mock trading, his first reaction was that he wouldn’t even attempt it because it was “too much of a hassle.”
“The hours sound long and you can only download the programme on PCs,” Kim said.
“My work computer can’t download external programmes. It doesn’t sound easy to bring an extra laptop with me to work.”
The mock trading exercises add to a slew of regulatory curbs since July to deter investors from trading the leveraged ETFs tied to Samsung Electronics and SK Hynix, the chipmaking duo that dominate the world’s AI supply chain.
Earlier tightening measures included a higher minimum deposit.
These single-stock ETFs were introduced in May to draw retail money into the local market, but quickly became a political hot potato.
During their heyday, turnover of the leveraged products and the two chipmaker stocks combined accounted for over 80% of the market’s total and triggered wild price swings. — Bloomberg
