Carbon Emission Allowance ETFs Rise Amid EU Environmental Regulation Tightening, Chinese ETFs Fall Due to COVID Lockdowns

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[Asia Economy Reporter Lee Myunghwan] Over the past month, among the exchange-traded funds (ETFs) listed on the domestic KOSPI market, ETFs themed around carbon emission permits showed decent returns. In contrast, China-themed ETF products fell more than 20%, recording dismal returns.

On the 28th, Asia Economy analyzed the returns of ETFs traded in the domestic stock market from the 25th of last month to the 25th of this month, finding that Shinhan Asset Management’s ‘SOL Europe Carbon Emission Permit Futures S&P(H)’ posted the highest return. This ETF, which traded at 12,175 KRW on March 25, closed at 13,900 KRW on April 25, rising 14.17%. Additionally, carbon emission permit ETFs such as ‘KODEX Europe Carbon Emission Permit Futures ICE(H)’ ranked from first to fourth in returns. Their average return was 13.69%, all showing solid returns above 13%.

The securities industry attributes this to the sharp rise in carbon emission permit prices due to the European Union (EU)’s strengthened environmental regulations. Kang Daeseung, a researcher at DB Financial Investment, stated, "For the time being, the direction of emission permit prices will mainly depend on the prolongation of the war and changes in the EU’s climate regulations," adding, "If concerns about economic slowdown increase due to the prolonged war and the EU adopts a more relaxed stance on climate regulations than before, the volatility of emission permit prices could further expand."

On the other hand, China-themed ETFs all showed a downward trend. Mirae Asset Management’s ‘TIGER China Electric Vehicle SOLACTIVE’ recorded the lowest return during this period at -25.49%. Other ETFs such as ‘SOL China Solar CSI (Synthetic)’ (-25.25%) and ‘TIGER China Semiconductor FACTSET’ (-22.94%) also experienced declines exceeding 20%. Among the 20 ETFs with the lowest returns during this period, 17 were China-themed products.

These ETFs were directly hit by lockdowns in major Chinese cities such as Shanghai. Kim Haein, a researcher at Daishin Securities, analyzed, "The resurgence of COVID-19 within China leading to renewed shutdowns, concerns that sanctions on Russia could extend to China, and the U.S. tightening regulations on Chinese companies listed in its market all contributed to the decline of China-related ETFs."

Meanwhile, besides these two themes, crude oil futures inverse ETFs ranked high, whereas game-related ETFs hovered near the bottom.

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