ETN and Others See Soaring Returns Amid Raw Material Rally

On the first day of the partial resumption of short selling on the 3rd, the KOSPI index is displayed on the electronic board in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Junho Hwang] As COVID-19 vaccine distribution and economic recovery continue, a rally in raw materials is driving up the returns of related funds, exchange-traded funds (ETFs), and exchange-traded notes (ETNs).

According to Samsung Securities on the 11th, the ETF and ETN with the highest returns over the past week was Shinhan Financial Investment's Corn Futures ETN, which posted a return of 11.6%. Trading volume increased by 44% compared to the previous week. Following that, Samsung Securities' Leverage Silver Futures ETN and Shinhan Financial Investment's same product rose by 10.7% and 10.5%, respectively. ETNs, like ETFs, are products that can be easily bought and sold on the exchange. They pay returns at maturity based on the performance of underlying assets such as raw material volatility.

During the same period, the net assets of raw material products also increased significantly. Mirae Asset Global Investments' (TIGER) Agricultural Futures Enhanced ETF, Samsung Asset Management's (KODEX) 3 Major Agricultural Futures, and KODEX Steel showed net asset growth rates of 8.8%, 8.9%, and 5.3%, respectively. Related fund returns also improved. According to Zeroin, Shinhan Asset Management's Agriculture Index Plus achieved a return of 28.11% since the beginning of the year. Mirae Asset Global Investments' Rogers Agricultural Index Special Asset also posted a return of 27.65%.

An industry insider from the asset management sector stated, "Looking at ETFs and ETNs that track each raw material futures, the tracking error is not significant," and added, "This indicates that the rise in raw material prices is being properly reflected."

As raw material futures rise, the profits and net assets of related products are expanding. According to Samsung Futures, the raw material with the highest increase since the beginning of the year is corn, up 48.2%. This is followed by tin at 46.5%, gasoline at 39.1%, and copper at 33.7%.

Expectations for economic recovery due to vaccine distribution and a weaker dollar have caused raw material prices, the rice of each country's industry, to rise sharply. Additionally, in the case of agricultural products, adverse supply-side factors have occurred due to abnormal weather in the U.S. Midwest and drought in Brazil. Non-ferrous metals continue to see price increases due to union strikes and production regulation issues. Researcher Kwangrae Park of Shinhan Financial Investment's Research Center noted in a report, "Although concerns about Brazil's crop conditions persist for corn, farmers are maintaining planting activities due to rising prices, so production decline is expected to be minimal."

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