Seoul Mayor Oh Says Government Knew Leverage Risks, Margin Hike Came Too Late

Seoul Mayor Oh Se-hoon issued a blunt criticism of leveraged derivatives, saying they have fueled volatility in South Korea’s stock market.

In a Facebook post on July 17, Oh wrote that the Kospi sidecar had been triggered 37 times this year, already surpassing the 26 recorded in all of 2008 during the global financial crisis. He blamed the government for approving single-stock leveraged derivatives despite knowing the risks, then standing by as retail investors’ assets were wiped out.

Oh said the capital market had been the last refuge for young people seeking upward mobility in a society where saving a monthly paycheck is no longer enough to buy a home. That refuge is now functioning as a cruel trap, he wrote.

He also criticized the government’s decision to raise margin requirements for leveraged products. Oh said authorities only belatedly lifted the minimum deposit for single-stock leveraged exchange-traded funds to 30 million won ($21,700), calling it a too-late response after the damage had already been done. He added that the government was scrambling to fix a lock that should have been shut long ago, but only after young people had been pushed to the edge of bankruptcy.

Oh also took aim at President Lee Jae-myung, saying he had again called for the cancellation of long-delinquent debt while dismissing concerns over moral hazard as irresponsible agitation. On one side, young people are being pushed into speculation, and on the other, the government is trying to claim credit through debt forgiveness, he wrote.