The government and the ruling Democratic Party of Korea moved Monday to contain stock market volatility, accelerating efforts to tighten regulations after single-stock leveraged ETFs drew widespread criticism for amplifying market swings. The main opposition People Power Party, meanwhile, escalated its offensive, demanding a parliamentary investigation into how the products were introduced and how the government has handled the fallout.
At a Supreme Council meeting at the National Assembly on Monday, Democratic Party supreme council member Park Ji-won said a government official had acknowledged failing to adequately assess the risks of single-stock leveraged products and investor protections during the introduction process, and had apologized. "The Democratic Party also takes that responsibility seriously," Park said.
Park added that the circumstances and review process behind the policy's rollout must be examined transparently and any wrongdoing corrected, but drew a distinction between flawed policy judgment and criminal conduct for electoral purposes. "Those are entirely different things," he said.
The Democratic Party said it supports tightening the regulatory framework but drew a line at the parliamentary investigation demanded by the opposition. Party chief spokesperson Kang Jun-hyeon told reporters after the Supreme Council meeting that the situation did not warrant a parliamentary probe, while acknowledging concern. "The government is working to understand the situation fully and devise countermeasures, and the relevant policy and finance committees are also giving it serious thought," Kang said.
Party spokesperson Park Ji-hye criticized the PPP's calls for a parliamentary investigation or special prosecutor as a political attack aimed at linking the issue to elections. "It is not appropriate to turn a situation in which citizens are worried and some have suffered losses into a political fight," she said.
The PPP doubled down on its call for a parliamentary investigation. Floor leader Jeong Jeom-sik proposed Sunday that the National Assembly launch a probe "to establish accountability for the chaos in the Kospi and Kosdaq markets." "Our stock market is not functioning normally right now," Jeong said. "It is time for the National Assembly to step in — to swiftly determine the causes and assign responsibility for the current situation, and to work toward the healthy development of the stock market."
The PPP said the probe should cover the introduction of single-stock leveraged ETFs and their aftermath, government actions it said stoked market overheating over the past year, government-driven disruptions that increased market uncertainty — including controversies over excess-profit distribution and the development of the Honam semiconductor cluster — the appropriateness of domestic equity investments by the national pension fund and other public funds over the past year, and the adequacy of financial regulators and economic policymakers in their respective roles.
PPP chief spokesperson Park Sung-hoon said in a statement that "a government that turned the stock market into a gambling den and then shirked responsibility has no right to speak of public trust." He said the party would use a parliamentary investigation to determine "who pushed ahead with the policy despite being warned of the risks, and who evaded accountability."
Financial authorities are considering granting themselves "emergency intervention powers" to manage market volatility — establishing a legal basis for stabilization measures in urgent situations. Options under discussion include reducing the leverage multiplier on single-stock leveraged ETFs when investor protection is deemed necessary.
The government earlier announced a package of remedial measures on July 16, including raising the minimum deposit requirement from 10 million won ($6,980) to 30 million won, with the changes taking effect July 30. Additional regulatory measures under discussion include setting individual investment limits, mandating simulated trading and increasing transaction cost burdens. Financial authorities plan to finalize and implement the details as soon as possible.
President Lee Jae-myung chaired a "real estate and stock market review meeting" at Cheong Wa Dae on Monday — his first economic schedule since returning from a trip to the United States and South America. Lee received a briefing from the Financial Services Commission on market conditions and was expected to discuss stabilization measures, including those related to single-stock leveraged ETFs.
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