South Korea convenes crisis meeting after Kospi plunge

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Korea steps up market response

Highlights

South Korea will hold an emergency market meeting Wednesday.
SK Hynix's earnings intensified the market selloff.
Regulators face criticism over leveraged ETFs.
Additional market stabilization measures are under review.

Finance Minister Koo Yun Cheol will chair the meeting beginning at 6 p.m. local time with the country's leading financial authorities, according to lawmaker Yoo Dong-soo. The move follows a day of parliamentary hearings during which lawmakers questioned the government's response to the market turmoil and its decision to introduce leveraged single-stock exchange-traded funds earlier this year, Bloomberg reported.

Pressure mounts after deep market losses

The Kospi has fallen roughly 40% from its June peak, with Wednesday's decline accelerating after SK Hynix reported earnings that disappointed investors and fueled concerns that enthusiasm surrounding artificial intelligence spending may be fading. The latest selloff triggered a market-wide circuit breaker for the second consecutive trading session.

Government officials acknowledged that leveraged single-stock ETFs, introduced in May, may have contributed to higher market volatility, although authorities said they were only one factor behind the broader decline. The Finance Ministry indicated that an existing package of stabilization measures remains in place and that additional steps could be introduced if market conditions continue to deteriorate.

Parliamentary hearings focused heavily on the speed with which the leveraged ETF products were approved. Opposition lawmakers argued that the products encouraged speculative trading concentrated in a small number of large-cap stocks, making South Korea's equity market more volatile than many overseas markets.

Regulators face growing scrutiny

The Financial Services Commission is already preparing tighter oversight of leveraged ETF trading. New rules taking effect on July 31 will introduce stricter requirements, while regulators are also considering investment limits for retail investors, mandatory investor education, and additional trading restrictions if speculative demand remains elevated.

The controversy has expanded beyond recent market losses to broader questions about financial regulation. Lawmakers criticized the approval process for the leveraged products, arguing that market stability concerns were overlooked during implementation. South Korea's top financial regulators also issued public apologies on Wednesday as criticism over the products continued to grow.

Focus turns to market stability

The emergency meeting represents one of the government's strongest responses since the market downturn accelerated this week. Any new support measures will be closely watched by investors seeking reassurance after the Kospi lost about 40% from its June high and market-wide circuit breakers were activated for two consecutive sessions.

The outcome could also shape future regulation of leveraged investment products as policymakers seek to restore confidence without disrupting capital markets.

Earlier, we reported that Asian stocks slide as SK Hynix results intensify AI valuation concerns.

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