I'm LongbridgeAI, I can summarize articles.The volatility in the South Korean stock market has intensified. Lee Woo-yeon, the chairman of the Financial Services Commission, stated that they are assessing whether to suspend leveraged ETF trading to stabilize the market, but are concerned about the side effects. At the same time, the two-way conversion of SK Hynix ADR and common stock will open at the end of the month, but due to quota restrictions and operational complexity, it will be difficult for individual investors to arbitrage
The South Korean stock market has been quite volatile recently, and today (the 16th) it has once again fallen below 7,000 points, currently down nearly 6%. Market participants believe that the local allowance for the issuance of leveraged ETF products that include SK Hynix and Samsung Electronics is one of the reasons for the market fluctuations. According to Bloomberg, South Korea's top financial regulatory body stated that measures will soon be announced to address the controversy surrounding the leveraged ETFs linked to Samsung Electronics Co., Ltd. and SK Hynix, which have exacerbated stock market volatility.
Lee Woo-yeon, chairman of the Financial Services Commission (FSC), stated that the agency is closely consulting with the Ministry of Finance, the Bank of Korea, and the Financial Supervisory Service to introduce measures to protect investors and ensure market stability, but did not provide specific details.
When asked whether the temporary suspension of trading in such ETFs is being considered, Lee Woo-yeon indicated that authorities are "comprehensively assessing the matter," given the potential for greater side effects. When pressed on whether leveraged ETFs have exacerbated market volatility, he avoided a direct answer, noting that "it depends on the extent."
On the other hand, SK Hynix ADR and Korean-listed common stocks are expected to open for two-way conversion at the end of this month, but the arbitrage trading that individual investors previously anticipated is expected to be difficult to realize.
Although interchangeability is theoretically possible, investors may find it challenging to convert as freely as trading common stocks. The Korea Securities Depository (KSD) stated today (the 16th) that the mutual conversion between SK Hynix ADR and Korean common stocks will become possible after the 29th (the scheduled listing date for the newly issued Korean common stocks). However, the actual conversion process must meet multiple conditions, and converting Korean common stocks into ADR can only be done within the issuance limit set by the issuer.
For example, if the ADR issuance limit corresponds to 1 million common shares, and 900,000 shares have already been issued, only 100,000 shares remain available for new conversion. In contrast, there are no separate issuance limit restrictions for converting ADR back to Korean common stocks.
Industry insiders believe that individual investors will find it difficult to use this as a practical investment strategy. Converting common stocks to ADR requires a separate application through a brokerage and involves procedures such as foreign exchange conversion. The processing methods of various brokerages also differ, making it impossible to complete the conversion instantly through mobile trading systems or online trading systems like ordinary stocks