"Crude Oil ETN·ETF 'Risky'... Financial Authorities Reissue Consumer Alert"

[Asia Economy Reporter Koh Hyung-kwang] Financial authorities have issued a second consumer alert regarding crude oil (WTI) futures-linked financial products.

On the 23rd, the Financial Supervisory Service (FSS) reissued the highest level 'Risk' grade consumer alert for WTI futures-linked Exchange Traded Notes (ETN) and Exchange Traded Funds (ETF) just two weeks after the first alert.

The FSS stated, "Due to the recent unprecedented negative prices of WTI crude oil futures and the rapidly expanding uncertainty in the WTI crude oil market, prices of WTI crude oil futures-linked products (ETN·ETF) have sharply declined and the premium/discount rates have significantly widened."

The price of Shinhan Leverage ETN fell from 2,355 KRW on the 9th to 695 KRW on the 22nd, a drop of 1,660 KRW (70.5%). Additionally, the premium/discount rate expanded from 63.9% to 1,044.0%, an increase of 980.1 percentage points during the same period. Samsung ETF's premium/discount rate stands at 42.4%.

The FSS explained, "This widening premium/discount rate is due to the intrinsic value (IV, NAV) sharply declining from the recent plunge in crude oil futures prices, while the market price decline was relatively limited due to a surge in buying demand for related products."

They added, "Given the recent rapid changes in the international crude oil market, the potential for losses in crude oil futures-linked ETN and ETF products has greatly increased, so investors need to exercise special caution. We plan to continue efforts in consultation with related agencies to normalize the ETN and ETF markets as soon as possible."

The FSS's issuance of the risk grade alert was the first since the consumer alert system was introduced in June 2012, with the initial alert issued on the 9th. The consumer alert system operates in three stages: Caution, Warning, and Risk.

This content was produced with the assistance of AI translation services.