South Korea’s financial markets are experiencing significant turmoil, with the country’s stock market down about 40% in a month. Local investors, including young people, pensioners, and families, are hurting the most due to their investments in leveraged products.

Government Response

The South Korean government has announced measures to stem the pain, including caps on individual investment into single-stock leveraged funds and raising trading costs for those ETFs. However, analysts say these rules may not be enough to quell volatility, as they do not target the scale of the ETFs’ leverage.

Regulators in Hong Kong have taken more aggressive action, reducing forced selling during market stress and helping to lower volatility. In contrast, South Korea’s rules will not affect similar leveraged products listed in New York and Hong Kong, which may continue to contribute to price swings.

Protests and Public Anger

As the stock market continues to plummet, public anger is growing. Protesters have laid condolence flowers outside the National Assembly building in Seoul, with some ribbons reading ‘Slaughtering retail investors’ and ‘Wait ’til pay back time, I will repay next time I vote.’ The Finance Minister has apologized for introducing the leveraged products without careful consideration.

The stock market has stabilized slightly after two straight sessions of heavy losses, but it is still a long way from arresting a downtrend that has erased $2 trillion in value from the KOSPI since June’s record high. The market is headed for its largest ever monthly fall, despite strong earnings from top chipmakers Samsung Electronics and SK Hynix.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.