Seoul: The financial watchdog on Wednesday warned retail investors against rushing to buy high-risk financial products amid increased market volatility:
According to Yonhap News Agency, the Financial Supervisory Service (FSS) reported that the daily average turnover of leveraged and inverse exchange traded products (ETPs) has amounted to 5.6 trillion won (US$3.77 billion) so far this year through March 10, marking a significant rise from 1.6 trillion won during the same period of last year.
The FSS highlighted that the market capitalization of such products stood at 21.7 trillion won, showing a substantial increase from 12.4 trillion won at the end of last year.
A leveraged ETF is structured to amplify the daily returns of an underlying asset by utilizing financial derivatives and debts, while an inverse ETF is created to perform the opposite of a specific index or benchmark.
The watchdog indicated that investors have been aiming to secure large gains by trading leveraged or inverse ETPs, taking advantage of the severe market downturn triggered by the ongoing crisis in the Middle East.
The FSS emphasized that retail investors should exercise caution when trading these products, as they face the possibility of substantial short-term losses.