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South Korea’s main stock exchange has delayed the launch of weekly options tied to single stocks, in a sign of growing concern about frothiness in the world’s best-performing equity market this year.
The Korea Exchange had planned to launch contracts linked to four of the country’s largest companies — chipmakers Samsung Electronics and SK Hynix, carmaker Hyundai Motor and battery producer LG Energy Solution — on June 29.
But intense volatility in the market, including a single-day drop of 8 per cent this month followed by an 8 per cent rise the next day, spurred the bourse to push back the launch, it said on Thursday.
“Taking recent market conditions into consideration, we have decided to postpone the listing,” the Korea Exchange said in a statement to the FT.
The decision follows an admission of “regret” from the head of South Korea’s Financial Supervisory Service this week over the launch of leveraged exchange traded funds tied to Samsung and SK Hynix.
The financial products are popular among retail investors, who have piled into the market as the two chipmakers ride a historic AI boom. Samsung shares have more than doubled since the start of the year, while SK Hynix has more than quadrupled.
But the ETFs are also volatile, with some experiencing wrong-way moves because of liquidity issues. On June 8, the ACE SK Hynix Single Stock Leveraged ETF, which promises double the daily return of SK Hynix shares, surged nearly 50 per cent even as the underlying stock fell 7.7 per cent.
The Kospi benchmark has experienced wild swings this year, triggering an unprecedented number of trading curbs. The index plummeted 10 per cent on Tuesday but is up 9 per cent since then. A gauge measuring the Kospi’s volatility is at a record high of 95.
Half of South Korea’s adult population now has brokerage accounts, up from 21 per cent in 2019. Margin debt stands at a record Won37tn ($24bn).
Regulators have justified the new weekly options as a way to broaden investment opportunities and reduce the incentive for South Koreans to trade similar derivatives on overseas exchanges.
The AI chip boom is driving astronomical returns on the Kospi, where Samsung and SK Hynix now comprise more than half of the index. Korea Exchange chief executive Jeong Eun-bo said last week that the high concentration of memory chip stocks could exacerbate volatility.
SK Hynix said in a regulatory filing on Wednesday it planned to list American depositary receipts on the Nasdaq exchange next month, giving US investors greater access to Asian chipmakers. Japanese memory chip supplier Kioxia said on Thursday it also planned to list in the US next year.
The Korea Exchange said it intended to proceed with weekly single-stock options “after taking into account market conditions and the state of institutional preparations”.
