Stagnant Stock Market... Turning to ETFs

[Asia Economy Reporter Junho Hwang] As the domestic stock market struggles to gain momentum, interest in exchange-traded funds (ETFs) has increased. In particular, overseas ETFs listed on the domestic stock market are gaining attention.

According to the Korea Exchange on the 2nd, the total net asset value of ETFs at the end of August was 64.187 trillion KRW, an increase of about 4.3729 trillion KRW (7.3%) compared to the end of the previous month. While it decreased by 0.7% in July, the sentiment changed within a month. From the beginning of this year to the end of August, 9.4 trillion KRW has flowed newly into ETFs.

The average daily trading value of ETFs last month also increased by about 430.2 billion KRW (19.2%) to 2.6736 trillion KRW compared to the previous month. Among this, individuals accounted for about 46.7% (1.2478 trillion KRW). This is analyzed as an increase in people turning to the ETF market due to expanded stock market volatility.

ETFs can be easily bought and sold like stocks, but they have the advantage of reducing risk because fund managers at asset management companies operate each stock.

Kim Jeong-hyun, Head of the ETF Management Center at Shinhan Asset Management, said, "Individual investors can be cited as the main drivers of recent growth in the domestic ETF market," adding, "As individuals, whose investment base has broadened through platforms like YouTube, shift from managing pension assets mainly with principal-protected products to managing them directly, the ETF market is expanding."

Among ETFs, products investing in overseas stocks are especially gaining popularity. The total net assets of overseas stock ETFs increased by 1.8924 trillion KRW (20.8%) from 9.085 trillion KRW in July to 10.9775 trillion KRW last month. ETFs investing in domestic stocks recorded 32.6904 trillion KRW, showing only a 5.7% increase compared to the previous month.

ETFs investing in overseas stocks also rank high among top net asset holdings. Among leveraged and inverse products used by institutional investors for hedging or KOSPI 200 tracking products attracting fund inflows, TIGER China Electric Vehicle SOLACTIVE recorded net assets of 1.9935 trillion KRW, ranking 5th. The difference in net assets with KODEX 200 Futures Inverse 2X (4th), which yields twice the inverse return of the KOSPI decline, was only 14.1 billion KRW.

The net asset growth of overseas stock investment ETFs was also high. TIGER China Electric Vehicle SOLACTIVE ranked 2nd among top net asset growth stocks with an increase of 599.9 billion KRW. Additionally, TIGER Global Lithium & Secondary Battery SOLACTIVE (6th, 303.5 billion KRW), TIGER US Nasdaq 100 (7th, 266.3 billion KRW), and TIGER US Tech TOP10 INDXX (10th, 171.4 billion KRW) also saw significant net asset increases.

Asset management companies are also gradually expanding overseas investment ETFs. Among the seven ETFs newly launched last month, five were ETFs investing in overseas stocks.

Center Head Kim said, "If the 4th Industrial Revolution response is the key to innovation in the industrial sector, ETFs (which are created and listed by asset managers, studied directly by individuals, and easily selected for cost-efficient investment) are establishing themselves as the leading innovators in the financial investment industry."

KB Asset Management ETF Management Director Cha Dong-ho forecasted, "The supply of products tailored to investor demand can be seen as a factor in market expansion, and since overseas markets such as the U.S. have grown through similar processes, trading volume and continuous product launches are expected for the time being."

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