The "Game of the Brave" for Korean retail investors ends: Leveraged ETF positions were liquidated and regulatory authorities urgently lowered leverage
[The "Game of the Brave" for Korean retail investors ends: Leveraged ETFs were liquidated and supervision urgently reduced leverage] On July 16, South Korea's financial regulatory authorities announced a series of management measures for single stock leveraged ETFs. The Financial Services Commission of South Korea (FSC) announced that as a supplementary measure against the risks of Samsung Electronics and SK Hynix individual stock leveraged ETFs, the regulatory authorities will suspend the listing of such new products and prohibit related advertising until the market stabilizes. In addition, regulatory authorities have significantly raised the investment threshold. The basic margin required to invest in such products will be increased from the current 10 million won to 30 million won, and only cash can be included in the basic margin.
Currently, South Korea is setting off a "deleveraging" storm triggered by the stock market crash and driven by regulation. On July 16, South Korea’s financial regulatory authorities announced a series of management measures for single stock leveraged ETFs. South Korea’s Financial Services Commission (FSC) issued an announcement saying that as a measure against Samsung The South Korean government suddenly lowered leverage, but it is still unknown how effective the measures will be. A series of negative impacts are continuing to ferment, and there is even a ridiculous scenario where "1 in every 30 adults is at risk of liquidation." It is still unknown whether the regulatory authorities' emergency suspension of leveraged ETF products can effectively calm market panic. However, the more profound risk is that once the deleveraging effect of the Korean stock market continues to ferment, the current local impact will spread outwards, eventually triggering systemic risks. Leveraged ETF positions were forced to be liquidated Mr. Han, an office worker in Mapo-gu, Seoul, South Korea, purchased 15 million won (approximately 68,000 yuan) in early July. Double leverage product. In less than half a month, one-third of the principal evaporated instantly, and the loss was The share price fell twice as much. In the "roller coaster" market of the Korea Composite Index, such cases have been repeated in South Korea. Some Korean investors bluntly said that many people only pay attention to the opportunity of such ETFs to double their income, but ignore that losses will also be multiplied. On May 27, the Korean Exchange approved the listing of 16 2x leveraged ETFs with individual stocks as targets for the first time, mainly Samsung. and SK Hynix, breaking the restriction of only allowing index leveraged ETFs. Previously, relevant individual stock leveraged products were only traded overseas. The original intention of this move was to align with global ETF standards and guide overseas funds back to the local capital market. However, this type of ETF product is fundamentally different from ordinary ETFs that simply hold stocks and spot commodities. Ordinary funds rise and fall simultaneously with the index, while leveraged ETFs rely on OTC income swaps, Two types of derivative instruments leverage earnings multiples. The mechanism of Korean financing transactions is that investors who have insufficient settlement funds can borrow short-term loans from securities firms, with the term usually being three trading days. If it cannot be replenished upon expiration, the brokerage will directly force the liquidation of the position on the next trading day - often at a low price, leaving retail investors with no say. It is worth noting that compared with traditional financing transactions, investors who purchase leveraged ETFs do not need to review credit qualifications, do not need to pay 4%-9% financing interest, and only need to complete 3 hours of investor registration. You can then use an ordinary securities account to buy without the pressure of daily margin calls. The convenience of "opening an account and getting leverage immediately after buying" makes this kind of ETF have strong buying demand in the secondary market, and the share price is prone to a premium relative to the net value. In late June, as the Korea Composite Index soared to a record high, new funds in the market continued to pour into such ETF products. However, within a month, the trend of the Korean Composite Index immediately reversed. "The role of leveraged ETFs in the collapse of the Korean stock market is by no means a simple amplifier." Liu Ying, a researcher at the Chongyang Institute for Financial Studies at Renmin University of China, pointed out in an interview with a reporter from the 21st Century Business Herald that in this round of collapse, the transmission mechanism of leveraged ETFs has changed from fueling the past to assisting the current decline. Its core lies in the operating rules of constant leverage. Through the rigid daily rebalancing mechanism, it performs passive chasing and selling operations, thus naturally possessing short-selling attributes and essentially becoming a pro-cyclical market fluctuation amplifier. Li Huihui, a professor of management practice at Lyon Business School in France, told the 21st Century Business Herald reporter that this type of single-share double-leveraged ETF has completely subverted the pricing logic of "spots determine derivatives" in the traditional capital market, and has turned into a deformed pattern of "derivatives kidnapping spot". He analyzed that when the market only saw a small correction in the valuation of technology stocks, the market makers of these ETFs had to carry out extremely mechanical and cost-less spot selling half an hour before the market close in order to hedge their own risks. This led to an extremely absurd phenomenon: Samsung The stock prices of the two technology giants, SK Hynix and SK Hynix, no longer depend on their orders and profits, but on how many retail investors liquidated their positions on the leverage side that day.
In South Korea, a large number of retail investors used financing and leveraged ETFs to pursue high returns, but they encountered forced liquidation during the sharp decline. Data shows that since July, South Korea's cumulative forced liquidation in the month has reached 344.2 billion won, of which 142.2 billion won was forced to be liquidated in a single day on July 9, a nearly five-fold increase from the 28.8 billion won the previous day. The balance of retail investors' margin deposits has evaporated by nearly 30 trillion won from the end of June, falling to 107.1 trillion won, the lowest level since June 2020. The market has even formed a vicious cycle, that is, falling stock prices - insufficient margins - forced liquidation - and further falling stock prices. Analyst Li Haoyang pointed out that the minimum initial margin in South Korea is only 40%, which is lower than the 50% in the United States and 100% in China. The maximum leverage is 2.5 times, and the tolerance for market fluctuations is weak. When the decline reaches a certain threshold, investors will face margin calls, otherwise their positions will be forced to be liquidated. This process will further increase the downward pressure on the financing purchase target. Liu Ying believes that the negative impact of such ETF products is constantly amplified due to the following factors: First, the target concentration is extremely high. The combined weight of Samsung Electronics and SK Hynix in the index has exceeded half. Secondly, there is a serious mismatch between the scale of leveraged products and the underlying liquidity. Furthermore, the cross-market leverage stacking effect intensifies the downward spiral. Since late June, the previous positive cycle has been completely reversed and evolved into a classic "death spiral": foreign capital suddenly withdrew, and leveraged ETFs were passively sold, triggering retail financing liquidations, which further depressed stock prices and triggered a new round of rebalancing selling of leveraged ETFs, forming a vicious cycle of "the more they fall, the more they sell, and the more they sell, the more they fall." This is more due to the technical mismatch between the capital structure and the leverage operating mechanism, rather than a simple Data shows that the "SK Hynix Single Stock Leveraged ETF" has a managed asset size of US$3.4 billion. It has fallen by approximately 45% since its listing, and has retraced more than 60% from its June high. As early as June, South Korean regulators had publicly expressed their regret for hastily approving the listing of ETF products. Liu Ying believes that this change in attitude not only warns of the risks of global leveraged ETFs, but also aggravates market panic. Financing funds in the Korean stock market in June were almost concentrated in Samsung Electronics and SK Hynix. Data shows that the total financing balance of the two stocks in mid-June was approximately 9.1 trillion won, accounting for 10% of South Korea’s total financing balance. More than one-third of the index's total financing balance. When these two stocks, which together account for more than 50% of the weight of the Korea Composite Index, plummet simultaneously, the selling pressure amplified by leverage may be far away. acceptable level of market liquidity. The first to bear the brunt are Korean retail investors. According to data from the Korean Financial Supervisory Service, as of July 13, the accounts of more than 1.2 million leveraged retail investors in the entire Korean market have hit the margin call line. Judging from South Korea's population base, this number is equivalent to 1 in every 30 adults (about 3.4%) facing the risk of liquidation. Behind the huge number of liquidated positions is the current situation of Korean retail investors borrowing money to speculate in stocks. Data from the Supervisory Authority shows that in the first five months of this year, the number of South Korea’s pension savings insurance contract cancellations increased by 62.7% year-on-year, and the scale of fund redemptions surged by 146.1% year-on-year. South Korea’s five largest businesses More than 85% of the full-year household loan limit has been consumed in the first half of the year. Since the beginning of this year, the investor structure of the Korean stock market has shown an unprecedented "retail investor-dominated" feature, while on the other hand, foreign capital outflows have continued to intensify. Since February this year, foreign investors have maintained a net selling trend. According to data from the Korea Exchange, as of June 25, the net outflow of foreign capital from Korean stocks this year has reached 127 trillion won, while individual investors and local institutions have net purchased 76 trillion won and 42 trillion won respectively. According to data from the Korean Financial Supervisory Service, from January to May this year, foreign capital sold a total of 114.224 trillion won in Korean stocks, more than 10 times the net sales of 11.0768 trillion won last year. In the past two months, the degree of "retail investorization" of Korean stocks has ranked among the highest among major global markets. At the same time, there have been rampant claims that foreign investors are shorting the Korean stock market. Judging from May data, foreign investors sold a net 47 trillion won of stocks of Korean listed companies, of which U.S. investors sold a net 28.861 trillion won, accounting for more than half of the overall net sales of foreign investors.
Li Huihui believes that the withdrawal of U.S. capital is not malicious short selling. It is actually an extension of the global "yen arbitrage trade unwinding" and the local defense war of U.S. stocks. “In the past two years, foreign investors were crazy about buying South Korea, not because they were optimistic about the Korean stock market, but because they regarded Samsung and SK Hynix as Ecological ‘highly elastic shadow target’. The Korean market has no capital controls and excellent liquidity, making it the best offshore leverage tool to amplify AI returns. "Li Huihui said that global macro liquidity is now tightened due to policy mismatches by central banks of various countries. In order to stick to the real core fundamentals of the country, foreign investors, such as , Meta and other company stocks, we must give priority to cutting off peripheral shadow assets with excessive volatility to cash out and return to defense. Liu Ying also believes that this time the withdrawal of US capital is more likely to be passive position adjustment than active short selling. Inflows from U.S. investors investing in Korean stocks through ETFs may not be fully captured by trading data. She said that the attitude of U.S. capital towards Korean stocks from indifference to enthusiasm and then to retreat was influenced by AI. Driven by factors such as the unexpected cycle, valuation advantage and allocation ratio reaching historical highs. The core reason for this reduction may be involuntary reduction of positions under compliance constraints, such as the 25% position limit, coupled with the pumping effect caused by the strengthening of the US dollar, loose confidence in the AI market, revaluation, and external impacts such as geopolitics. Global capital flows are showing a trend of returning from South Korea to the United States, from active management to passive investment, and from foreign capital dominance to domestic capital dominance. The Korean stock market is in the process of deleveraging. According to media statistics, the financing balance of the Korean stock market rose from 27.4 trillion won (approximately 124.6 billion yuan) in early January to a high of 38.6 trillion won (approximately 175.5 billion yuan) on June 24, and then fell rapidly. As of July 14, it dropped to 34.7 trillion won, a drop of 3.9 trillion won (approximately 17.7 billion yuan) from the high point. Recently, an extremely rare phenomenon has occurred in the Korean financial market: along with the selling of foreign capital, the market has also seen net selling by Korean retail investors. Taking the SK Hynix Leveraged ETF as an example, retail investors have purchased a net 4.73 trillion won since its listing. Even though SK Hynix's stock price fell 28.62% from its high point on June 25, retail investors still bought a net 1.55 trillion won. It was not until the two trading days of July 14 and 15 that it turned into net selling, with a total of 474.4 billion won sold on the two days. "Simultaneous net selling by foreign investors and retail investors is relatively rare in the Korean financial market, which means that the liquidity of domestic and foreign investors is shrinking." Liu Ying explained that retail investors turned from being the main takers to being forced to flee due to exhaustion of leverage and forced liquidation. If the situation persists, systemic risks within the stock market, that is, stampedes and circuit breakers, may have already occurred, but have evolved into a comprehensive The probability of a systemic crisis is low, and external buffers are better than in 1997. The risk path is more reflected in the stock market catastrophic crisis rather than System crisis. We need to be alert to the financial risks of securities companies and cross-market spillovers, especially field and social risks. Some analysts believe that the current deleveraging in the Korean stock market still has a strong passive nature. Wu Qicong, an assistant researcher at the Chongyang Financial Research Institute of Renmin University of China, said that only when the financing balance declines, the amount of forced liquidation continues to fall, and the funds in investor accounts stabilize, can it be shown that the market is truly close to completing risk clearing. In the process of deleveraging, forced liquidation of positions in the Korean stock market continues. If this situation continues, what financial risks will it bring? Liu Ying said that the forced liquidation storm will lead to a "death spiral" of leveraged ETFs and may further trigger systemic risks. The most direct technical reason is the daily net value multiple reset mechanism. The particularity of the Korean market also lies in the serious mismatch between size and liquidity, the high concentration of underlying assets, and the fragile buffer brought about by low margin thresholds. The high concentration of financing balances has become a hotbed of undervalued systemic risks, giving investors a false sense of security.
She further said that if the forced liquidation continues, the worst-case scenario may include: the self-reinforcing "death spiral", liquidity drying up, the market losing its price discovery function, and panic spreading into indiscriminate selling. Another consequence is that brokerage firms' balance sheets are under pressure. A dangerous sign that a retail crisis is evolving into a systemic risk is that after investors close their positions, they still owe margin to brokers, resulting in a negative balance. There are also sharp expansions in market bid-ask spreads, intensified late-trading volatility, and frequent circuit breakers. In addition, risks may also spill over to the global semiconductor industry chain, affecting Price expectations put pressure on U.S. semiconductor companies, promote the re-pricing of AI hardware valuations, and intensify the volatility of global technology stocks. In addition, at the social level, the impact of wealth disillusionment on the younger generation requires greater attention. "In general, this deleveraging is not over yet, but the fundamentals have not completely collapsed." Liu Ying said that the root cause of the forced liquidation lies in the self-reinforcing negative feedback loop of leveraged ETFs, rather than the deterioration of the fundamentals of the semiconductor cycle. It is a technical mismatch between the capital structure and the leverage operation mechanism. If the forced liquidation continues, the worst-case scenario may lead to liquidity risks. Under this circumstance, South Korea’s financial regulatory authorities announced a series of management measures for single-stock leveraged ETFs, including suspending the listing of new leveraged ETF products, increasing the basic margin to 30 million won, tightening securities companies’ management standards for premium and discount rates from the current 3% to 2%, and considering imposing new ETF listing restrictions on ETF operators that violate premium rate adequacy requirements. South Korea's Financial Services Commission (FSC) stated that it will continue to monitor market conditions and consider additional measures in stages if the market fails to stabilize. Liu Ying said that the core purpose of South Korea's urgent new ETF regulatory policy is to cut off the negative feedback spiral, prevent retail investors from systematically liquidating their positions and trigger financial turmoil, and correct the previous radical financial innovation policies. The social level is intended to prevent social unrest caused by disillusionment with retail investor wealth, the structural level is intended to reduce overreliance on the semiconductor duo, and the political level is intended to recognize and correct regulatory errors. The logic of the New Deal is to "deleverage, protect retail investors, and stabilize the structure." It will help reduce passive selling pressure in the short term and mark the regulatory shift from radical openness to prudent supervision in the long term. However, she also reminded that policy uncertainty may also weaken foreign investors' confidence in the stability of the Korean stock market system. However, experts interviewed believe that the actual effectiveness of the Korean government's leverage reduction is still unknown. "It is effective to stop bleeding in the short term, but treating the symptoms may not necessarily cure the root cause." Liu Ying believes that the policy has blocked the entrance to the increase, but has not solved the problem of how to safely discharge floods from the existing "reservoirs". Raising the margin threshold may intensify selling pressure in the short term. The chain reaction of forced deleveraging has already occurred, and the negative feedback loop is still evolving. Retail investors have turned from the last force to take orders into sellers, the market has lost its only buffer, and the self-reinforcement of the decline may become more intense. If the AI trend weakens from a disturbance to a loosening of valuation anchors, it will resonate with leverage clearing and amplify market fluctuations. Liu Ying said that subsequent evolution may present different scenarios such as orderly.
In South Korea, a large number of retail investors used financing and leveraged ETFs to pursue high returns, but they encountered forced liquidation during the sharp decline. Data shows that since July, South Korea's cumulative forced liquidation in the month has reached 344.2 billion won, of which 142.2 billion won was forced to be liquidated in a single day on July 9, a nearly five-fold increase from the 28.8 billion won the previous day. The balance of retail investors' margin deposits has evaporated by nearly 30 trillion won from the end of June, falling to 107.1 trillion won, the lowest level since June 2020. The market has even formed a vicious cycle, that is, falling stock prices - insufficient margins - forced liquidation - and further falling stock prices. Analyst Li Haoyang pointed out that the minimum initial margin in South Korea is only 40%, which is lower than the 50% in the United States and 100% in China. The maximum leverage is 2.5 times, and the tolerance for market fluctuations is weak. When the decline reaches a certain threshold, investors will face margin calls, otherwise their positions will be forced to be liquidated. This process will further increase the downward pressure on the financing purchase target. Liu Ying believes that the negative impact of such ETF products is constantly amplified due to the following factors: First, the target concentration is extremely high. The combined weight of Samsung Electronics and SK Hynix in the index has exceeded half. Secondly, there is a serious mismatch between the scale of leveraged products and the underlying liquidity. Furthermore, the cross-market leverage stacking effect intensifies the downward spiral. Since late June, the previous positive cycle has been completely reversed and evolved into a classic "death spiral": foreign capital suddenly withdrew, and leveraged ETFs were passively sold, triggering retail financing liquidations, which further depressed stock prices and triggered a new round of rebalancing selling of leveraged ETFs, forming a vicious cycle of "the more they fall, the more they sell, and the more they sell, the more they fall." This is more due to the technical mismatch between the capital structure and the leverage operating mechanism, rather than a simple Data shows that the "SK Hynix Single Stock Leveraged ETF" has a managed asset size of US$3.4 billion. It has fallen by approximately 45% since its listing, and has retraced more than 60% from its June high. As early as June, South Korean regulators had publicly expressed their regret for hastily approving the listing of ETF products. Liu Ying believes that this change in attitude not only warns of the risks of global leveraged ETFs, but also aggravates market panic. Financing funds in the Korean stock market in June were almost concentrated in Samsung Electronics and SK Hynix. Data shows that the total financing balance of the two stocks in mid-June was approximately 9.1 trillion won, accounting for 10% of South Korea’s total financing balance. More than one-third of the index's total financing balance. When these two stocks, which together account for more than 50% of the weight of the Korea Composite Index, plummet simultaneously, the selling pressure amplified by leverage may be far away. acceptable level of market liquidity. The first to bear the brunt are Korean retail investors. According to data from the Korean Financial Supervisory Service, as of July 13, the accounts of more than 1.2 million leveraged retail investors in the entire Korean market have hit the margin call line. Judging from South Korea's population base, this number is equivalent to 1 in every 30 adults (about 3.4%) facing the risk of liquidation. Behind the huge number of liquidated positions is the current situation of Korean retail investors borrowing money to speculate in stocks. Data from the Supervisory Authority shows that in the first five months of this year, the number of South Korea’s pension savings insurance contract cancellations increased by 62.7% year-on-year, and the scale of fund redemptions surged by 146.1% year-on-year. South Korea’s five largest businesses More than 85% of the full-year household loan limit has been consumed in the first half of the year. Since the beginning of this year, the investor structure of the Korean stock market has shown an unprecedented "retail investor-dominated" feature, while on the other hand, foreign capital outflows have continued to intensify. Since February this year, foreign investors have maintained a net selling trend. According to data from the Korea Exchange, as of June 25, the net outflow of foreign capital from Korean stocks this year has reached 127 trillion won, while individual investors and local institutions have net purchased 76 trillion won and 42 trillion won respectively. According to data from the Korean Financial Supervisory Service, from January to May this year, foreign capital sold a total of 114.224 trillion won in Korean stocks, more than 10 times the net sales of 11.0768 trillion won last year. In the past two months, the degree of "retail investorization" of Korean stocks has ranked among the highest among major global markets. At the same time, there have been rampant claims that foreign investors are shorting the Korean stock market. Judging from May data, foreign investors sold a net 47 trillion won of stocks of Korean listed companies, of which U.S. investors sold a net 28.861 trillion won, accounting for more than half of the overall net sales of foreign investors.
Li Huihui believes that the withdrawal of U.S. capital is not malicious short selling. It is actually an extension of the global "yen arbitrage trade unwinding" and the local defense war of U.S. stocks. “In the past two years, foreign investors were crazy about buying South Korea, not because they were optimistic about the Korean stock market, but because they regarded Samsung and SK Hynix as Ecological ‘highly elastic shadow target’. The Korean market has no capital controls and excellent liquidity, making it the best offshore leverage tool to amplify AI returns. "Li Huihui said that global macro liquidity is now tightened due to policy mismatches by central banks of various countries. In order to stick to the real core fundamentals of the country, foreign investors, such as , Meta and other company stocks, we must give priority to cutting off peripheral shadow assets with excessive volatility to cash out and return to defense. Liu Ying also believes that this time the withdrawal of US capital is more likely to be passive position adjustment than active short selling. Inflows from U.S. investors investing in Korean stocks through ETFs may not be fully captured by trading data. She said that the attitude of U.S. capital towards Korean stocks from indifference to enthusiasm and then to retreat was influenced by AI. Driven by factors such as the unexpected cycle, valuation advantage and allocation ratio reaching historical highs. The core reason for this reduction may be involuntary reduction of positions under compliance constraints, such as the 25% position limit, coupled with the pumping effect caused by the strengthening of the US dollar, loose confidence in the AI market, revaluation, and external impacts such as geopolitics. Global capital flows are showing a trend of returning from South Korea to the United States, from active management to passive investment, and from foreign capital dominance to domestic capital dominance. The Korean stock market is in the process of deleveraging. According to media statistics, the financing balance of the Korean stock market rose from 27.4 trillion won (approximately 124.6 billion yuan) in early January to a high of 38.6 trillion won (approximately 175.5 billion yuan) on June 24, and then fell rapidly. As of July 14, it dropped to 34.7 trillion won, a drop of 3.9 trillion won (approximately 17.7 billion yuan) from the high point. Recently, an extremely rare phenomenon has occurred in the Korean financial market: along with the selling of foreign capital, the market has also seen net selling by Korean retail investors. Taking the SK Hynix Leveraged ETF as an example, retail investors have purchased a net 4.73 trillion won since its listing. Even though SK Hynix's stock price fell 28.62% from its high point on June 25, retail investors still bought a net 1.55 trillion won. It was not until the two trading days of July 14 and 15 that it turned into net selling, with a total of 474.4 billion won sold on the two days. "Simultaneous net selling by foreign investors and retail investors is relatively rare in the Korean financial market, which means that the liquidity of domestic and foreign investors is shrinking." Liu Ying explained that retail investors turned from being the main takers to being forced to flee due to exhaustion of leverage and forced liquidation. If the situation persists, systemic risks within the stock market, that is, stampedes and circuit breakers, may have already occurred, but have evolved into a comprehensive The probability of a systemic crisis is low, and external buffers are better than in 1997. The risk path is more reflected in the stock market catastrophic crisis rather than System crisis. We need to be alert to the financial risks of securities companies and cross-market spillovers, especially field and social risks. Some analysts believe that the current deleveraging in the Korean stock market still has a strong passive nature. Wu Qicong, an assistant researcher at the Chongyang Financial Research Institute of Renmin University of China, said that only when the financing balance declines, the amount of forced liquidation continues to fall, and the funds in investor accounts stabilize, can it be shown that the market is truly close to completing risk clearing. In the process of deleveraging, forced liquidation of positions in the Korean stock market continues. If this situation continues, what financial risks will it bring? Liu Ying said that the forced liquidation storm will lead to a "death spiral" of leveraged ETFs and may further trigger systemic risks. The most direct technical reason is the daily net value multiple reset mechanism. The particularity of the Korean market also lies in the serious mismatch between size and liquidity, the high concentration of underlying assets, and the fragile buffer brought about by low margin thresholds. The high concentration of financing balances has become a hotbed of undervalued systemic risks, giving investors a false sense of security.
She further said that if the forced liquidation continues, the worst-case scenario may include: the self-reinforcing "death spiral", liquidity drying up, the market losing its price discovery function, and panic spreading into indiscriminate selling. Another consequence is that brokerage firms' balance sheets are under pressure. A dangerous sign that a retail crisis is evolving into a systemic risk is that after investors close their positions, they still owe margin to brokers, resulting in a negative balance. There are also sharp expansions in market bid-ask spreads, intensified late-trading volatility, and frequent circuit breakers. In addition, risks may also spill over to the global semiconductor industry chain, affecting Price expectations put pressure on U.S. semiconductor companies, promote the re-pricing of AI hardware valuations, and intensify the volatility of global technology stocks. In addition, at the social level, the impact of wealth disillusionment on the younger generation requires greater attention. "In general, this deleveraging is not over yet, but the fundamentals have not completely collapsed." Liu Ying said that the root cause of the forced liquidation lies in the self-reinforcing negative feedback loop of leveraged ETFs, rather than the deterioration of the fundamentals of the semiconductor cycle. It is a technical mismatch between the capital structure and the leverage operation mechanism. If the forced liquidation continues, the worst-case scenario may lead to liquidity risks. Under this circumstance, South Korea’s financial regulatory authorities announced a series of management measures for single-stock leveraged ETFs, including suspending the listing of new leveraged ETF products, increasing the basic margin to 30 million won, tightening securities companies’ management standards for premium and discount rates from the current 3% to 2%, and considering imposing new ETF listing restrictions on ETF operators that violate premium rate adequacy requirements. South Korea's Financial Services Commission (FSC) stated that it will continue to monitor market conditions and consider additional measures in stages if the market fails to stabilize. Liu Ying said that the core purpose of South Korea's urgent new ETF regulatory policy is to cut off the negative feedback spiral, prevent retail investors from systematically liquidating their positions and trigger financial turmoil, and correct the previous radical financial innovation policies. The social level is intended to prevent social unrest caused by disillusionment with retail investor wealth, the structural level is intended to reduce overreliance on the semiconductor duo, and the political level is intended to recognize and correct regulatory errors. The logic of the New Deal is to "deleverage, protect retail investors, and stabilize the structure." It will help reduce passive selling pressure in the short term and mark the regulatory shift from radical openness to prudent supervision in the long term. However, she also reminded that policy uncertainty may also weaken foreign investors' confidence in the stability of the Korean stock market system. However, experts interviewed believe that the actual effectiveness of the Korean government's leverage reduction is still unknown. "It is effective to stop bleeding in the short term, but treating the symptoms may not necessarily cure the root cause." Liu Ying believes that the policy has blocked the entrance to the increase, but has not solved the problem of how to safely discharge floods from the existing "reservoirs". Raising the margin threshold may intensify selling pressure in the short term. The chain reaction of forced deleveraging has already occurred, and the negative feedback loop is still evolving. Retail investors have turned from the last force to take orders into sellers, the market has lost its only buffer, and the self-reinforcement of the decline may become more intense. If the AI trend weakens from a disturbance to a loosening of valuation anchors, it will resonate with leverage clearing and amplify market fluctuations. Liu Ying said that subsequent evolution may present different scenarios such as orderly.