Following Warnings from FSS
The Financial Supervisory Service issued warnings on crude oil futures ETNs and ETFs and Samsung Asset Management urgently changed its ETF management method in order to help investors avoid complete losses.
On April 23, the company significantly reduced the ratio of the June portion and newly incorporated July to September portions in the KODEX WTI Crude Oil Futures (H) ETF. Specifically, the ratio of the June portion was dropped from 79.22 percent to 19.82 percent and those of July, August and September were raised to 19.82 percent, 19.26 percent and 9.42 percent, respectively. At the same time, the ratio of the US OIL FUND ETF (USO) was adjusted from 20.78 percent to 18.65 percent.
In the meantime, securities companies warned about the possibility of complete losses and delisting of inverse ETNs currently worth about 500 billion won. For example, Shinhan Investment Corporation announced that its Shinhan Inverse 2X WTI Crude Oil Futures ETN (H) may cause complete losses once the crude oil futures price rises 50 percent or more. According to Korea Exchange, a total of six inverse ETNs are currently available in relation to crude oil investment, the aggregate market value of the six products was 505.5 billion won on April 22, and three leveraged inverse ETNs account for approximately 80 percent of the aggregate market value.
The Financial Supervisory Service introduced the consumer warning for ETNs investing in crude oil futures in June 2012. The warning on April 9 this year was the first maximum warning since the introduction.