Exchange "Opening of the Era of 500 ETF Market Items"

[Asia Economy Reporter Song Hwajeong] The domestic Exchange-Traded Fund (ETF) market surpassed 500 listings 19 years after its establishment in 2002.

According to the Korea Exchange on the 9th, with the listing of three ETFs including Mirae Asset Global Investments' 'TIGER China Semiconductor FACTSET' on the KOSPI market, the total number of ETFs in the domestic market increased to 502.

The ETF market has shown continuous growth since its inception, with significant increases in total net assets and average daily trading volume. The number of listed ETFs was only 4 when the market opened in October 2002, but it grew to 200 by January 2016 and expanded to 400 by October 2018.

Total net assets increased from 344.4 billion KRW in 2002 to 61.8562 trillion KRW as of the 6th of this month, a 180-fold increase. On May 28th, it even recorded an all-time high of 62 trillion KRW. The average daily trading volume rose from 32.7 billion KRW in 2002 to 3.1741 trillion KRW from January to August 6 this year, a 97-fold increase.

The Korean ETF market ranks 7th globally in terms of the number of listings (2nd in Asia), 11th in total net assets (4th in Asia), and 3rd in average daily trading volume (2nd in Asia).

Growth was driven not only by domestic market-representative products but also by various ETFs including sectoral, active, and overseas types. Sectoral and thematic ETFs showed relatively high growth due to increased investment demand in new industries such as BBIG (Battery, Bio, Internet, Game), Future Mobility, and Renewable Energy. While the asset size of overall and domestic market-representative ETFs increased by 2.1 times and 1.5 times respectively, domestic and overseas sector ETFs grew 7.5 times. Additionally, many active ETFs have been listed recently, increasing total net assets by 2.3 times and the number of listings by 5 times (from 6 to 30) compared to August 2017.

Interest in overseas investment has led to steady growth in both asset size and number of overseas ETFs. From January to July this year alone, total net assets increased by 4.9 trillion KRW. Conversely, the proportion of derivative ETFs is declining. Although the trading volume share of leverage and inverse ETFs rose significantly to 74.2% last year, it dropped sharply to 45.2% as of July this year compared to the previous year. A Korea Exchange official explained, "This is due to reduced market volatility compared to last year, increased investor awareness from mandatory basic deposits and pre-education, and growing investment demand for sectoral and bond ETFs."

Recently, ETF investments through pension accounts have been steadily increasing due to long-term investment trends and tax benefits. Based on data from five securities firms including Mirae Asset Securities, Samsung Securities, Korea Investment & Securities, NH Investment & Securities, and Shinhan Financial Investment, the ETF balance in pension accounts rose from 471.7 billion KRW in 2019 to 1.9756 trillion KRW last year, and further to 2.9613 trillion KRW in the first quarter of this year.

The number of large ETFs with total net assets exceeding 1 trillion KRW continued to grow due to asset price increases and inflows of institutional funds amid economic recovery expectations. The number of ETFs with total net assets over 1 trillion KRW increased from 6 in 2016 to 12 in 2019, and expanded to 15 as of July this year. This year, the overseas ETF 'TIGER China Electric Vehicle SOLACTIVE' surpassed 1 trillion KRW in total net assets for the first time. Additionally, the number of ETFs preferred by institutional investors with total net assets over 100 billion KRW reached 96, an increase of 20 from the end of last year.

A Korea Exchange official stated, "We will support expanding investors' choices by continuously supplying investment products tailored to investor demand, such as various domestic and overseas sectoral and equity-type active ETFs. For derivatives like leverage and inverse ETFs, we will continue investor education on product characteristics and risks to protect investors."

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