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(July 15): South Korean President Lee Jae Myung said the nation’s stock market surged in a short period and would need time to stabilise, after his administration faced criticism for the extreme volatility blamed by some on leveraged products. 

“Our domestic stock market is quite unstable,” Lee said at a policy meeting with top government officials in Seoul Wednesday. “In fact, since it experienced a historically unprecedented massive surge in such a short period that it would require time and fluctuation to stabilize.” 

South Korean stocks have turned choppy in recent weeks, after a world-beating rally fueled by a pair of chipmakers made the US$4 trillion market vulnerable to shifts in AI trade sentiment.

Leveraged exchange-traded funds tracking SK Hynix Inc and Samsung Electronics Co — and the vast amount of rebalancing trades needed daily to deliver promised returns — have been criticised for amplifying swings. 

Lee acknowledged recent controversy surrounding leveraged ETFs and urged the heads of the Financial Supervisory Service and the Korea Exchange to swiftly address the issue and prepare follow-up measures.

Market participants are expecting measures to curb the destabilising impact of the risky products, including a potentially higher minimum deposit requirement to invest in leveraged ETFs. The Kospi Index fell into a bear market earlier this month as losses from its peak extended to 20%. It is still up more than 70% in 2026 and was trading up 7.6% on Wednesday. 

The market rout has the potential to become a political flashpoint. The main opposition People Power Party (PPP) on Tuesday accused the Lee administration of encouraging excessive risk-taking by promoting ambitious stock-market targets while overlooking growing leverage.

PPP floor leader Jeong Jeom-sig said the government ignored repeated warnings that leverage was building beneath the market’s headline gains. “It’s enough to make people feel dizzy just watching Kospi,” Jeong said during a meeting of the party’s floor leadership.

President Lee has made narrowing the so-called “Korea discount” one of his key objectives. His government has rolled out measures to curb stock-price manipulation and strengthen shareholder rights to bolster confidence in the stock market.

Uploaded by Liza Shireen Koshy

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