President says briefing cited overseas capital outflows; product launch coincided with market peak, amplifying losses

Next policy chief selection to reflect possible shift from economic growth to social policy

President Lee Jae Myung greets reporters before a press conference at Cheong Wa Dae's Yeongbingwan on Friday. [Yonhap]
President Lee Jae Myung greets reporters before a press conference at Cheong Wa Dae's Yeongbingwan on Friday. [Yonhap]

President Lee Jae Myung acknowledged Friday that the introduction of single-stock leveraged ETFs was marked by policy shortcomings and incompleteness, while signaling that the selection of a new Cheong Wa Dae policy chief could reflect a shift away from economic priorities toward social policy.

Speaking at his seventh press conference since taking office, held at Cheong Wa Dae's Yeongbingwan, Lee said he had been briefed on the leveraged ETF regime when it was introduced, though he acknowledged gaps in his knowledge of the procedural details. "I have not yet grasped the specific procedural details of how the decision was made," he said, "but I was briefed on the introduction of leveraged ETFs at the time."

Lee said the briefing centered on the fact that leveraged ETF products tied to Samsung Electronics, SK hynix and other domestic companies were already available on overseas markets, including in Hong Kong, and that Korean investors were going abroad to buy them because no equivalent product existed at home. "Domestic investors were anyway going to overseas markets to buy leveraged ETFs on Samsung, SK hynix and the like," he said, "so there were clear advantages to letting them do that at home." He cited two benefits: keeping investment flows domestic would support foreign exchange market stability by eliminating the need to purchase dollars, and it was simply the right principle to encourage investment in the domestic market rather than sending investors abroad.

Lee noted, however, that the product launch coincided with what turned out to be the peak of the market rally, magnifying investor losses as share prices fell. "Looking back, it seems that was nearly the final stage of the share price upswing," he said. "Once the market turned downward, gains that had been doubled became losses that were doubled — and as prices fell below the purchase price, those losses were amplified further, leaving quite a few people significantly worse off."

He was candid about the limits of government policy. "Whether share prices will rise, or whether an investment will produce a gain or a loss, is something even the spirits cannot know," Lee said. "But I do think there was some incompleteness in government policy." He added that criticism was valid: "One could fairly ask why we did not build in all those safeguards from the start rather than adding them later. I think it is fair to say there were shortcomings."

Meanwhile, Lee signaled a possible role adjustment in selecting the next Cheong Wa Dae policy chief. "I am still deliberating over the policy chief appointment," he said, explaining that the administration had until now concentrated almost all its energy on economic recovery, sustained growth and securing growth drivers. "Now that about a year and several months have passed, there are calls to shift the policy focus somewhat toward strengthening social policy, which I feel has been considerably lacking," he added. "I am deliberating on that point as well, and I am looking for the right person."


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