40-Year History 'Eunhaeng Jisu' Disappears, 'Geumyung Jijusa Jisu' in Focus... Active Development of ETF·ETN Product Indices

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[Asia Economy Reporter Lee Seon-ae] The "Bank Index" has disappeared. Due to banks transitioning to a financial holding company system, it no longer holds value as a market analysis index. Instead, the Financial Holding Company Index is likely to replace it. Additionally, various product indices targeting the increasingly growing Exchange-Traded Funds (ETF) and Exchange-Traded Notes (ENN) markets are expected to emerge.

According to the Korea Exchange on the 27th, the calculation of the Bank Index was discontinued from that day. It had been calculated for 40 years since 1983.

The Index Business Division, which develops, calculates, and manages market (industry) and product indices, explained, "The Bank Index was calculated only until last Friday and was discontinued from this day. Due to banks being incorporated into financial holding companies, the current Bank Index consists of only three stocks: KakaoBank, Industrial Bank of Korea, and Jeju Bank. Given that the market capitalization-based weighting characteristic of the market index results in KakaoBank accounting for 70%, the index moves in line with KakaoBank's stock price, making it meaningless."

Market (industry) indices require at least 10 stocks to be included to produce statistically meaningful figures. Under the Financial Industry Index, sub-indices such as banking, insurance, and securities were operated. When the Bank Index began calculation in 1983, it held value as a representative domestic bank stock, but after incorporation into financial holding companies, the stocks were delisted, leaving only three stocks remaining.

The Korea Exchange is considering calculating a Financial Holding Company Index. The Exchange stated, "We will assess whether there is demand to subdivide the Financial Holding Company Index and particularly determine if this index shows differentiation from the Financial Industry Index before finalizing whether to calculate it."

Currently, the Index Business Division calculates and manages a total of 403 indices (67 market indices and 336 product indices). Market indices are calculated using a market capitalization-weighted method, while product indices use a market capitalization-weighted method based on the number of floating shares. Including unofficial indices that are not calculated, the Exchange manages about 1,200 indices.

Although index development requires significant costs and time, the Exchange plans to release various product indices targeting the growing ETF and ETN markets. Product indices are used as underlying assets for derivatives such as futures and options, as well as tracking indices for indirect investment products (ETFs, index funds, etc.).

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