Progressive Civic Group Calls Single-Stock Leverage Products a Policy Failure Amid Korea Selloff

"A belated fix after the damage was done"

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

As the Kospi plunges, even a progressive civic group has pointed to government financial policy as a driver of 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 viewed as a core policy failure behind the latest market turmoil.

Repeatedly optimistic signals from the government and the creation of a high-risk investment environment increased investors' appetite for risk and amplified market volatility, the group said.

It also criticized authorities for taking an overly complacent approach to issues such as volatility far exceeding that of conventional ETFs, the potential for market shocks and risk management.

The group said the government's decision to announce supplemental measures only after market volatility expanded following the products' launch was akin to fixing the barn after the cow was stolen. That, it said, was effectively an acknowledgment that authorities had underestimated the risks of single-stock leveraged products and rushed their introduction.

It added that officials should swiftly conduct a thorough investigation into the rollout of the products, take responsible follow-up measures, prepare temporary safeguards on short selling if needed, and pursue broader market-stabilization steps that include the Kosdaq market.

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