KOSPI 9 Times... ETN Soars Sharply Amid Natural Gas Surge

Average 67.38% Increase in 5 Products Over One Month
KOSPI Up 7.6% in the Same Period
Strong Performance in US Stock Market... Experts Say "Further Natural Gas Price Rise Possible"

[Asia Economy Reporter Myung-hwan Lee] Prices of exchange-traded products (ETPs) tracking natural gas-related indices are soaring. This is because natural gas prices have recently surged due to supply shortages caused by the Russia-Ukraine war and a sharp increase in cooling demand. Experts predict that the factors driving up natural gas prices are likely to continue, making further price increases possible.

On the 19th, Asia Economy analyzed the recent one-month stock price trends of natural gas-related exchange-traded notes (ETNs) listed on the domestic stock market. The average price increase rate of five products that closely track the index was 67.38%. During the same period, the KOSPI rose by only 7.6%.

Among the ETNs, leveraged products that track natural gas-related indices at twice the rate stood out with price increases in the 80% range. During this period, the ‘TRUE Leverage Natural Gas Futures ETN(H)’ recorded the highest increase at 85.94%. This product, priced at 12,520 KRW on July 18, rose to 23,280 KRW by August 18. Other products such as ‘Samsung Leverage Natural Gas Futures ETN B’ (85.12%) and ‘Shinhan Leverage Natural Gas Futures ETN’ (85.08%) also showed high growth rates. Conversely, so-called ‘inverse double’ ETNs that track the same index inversely at twice the rate experienced price declines exceeding 50%.

Natural gas-related exchange-traded funds (ETFs) listed on the U.S. stock market also posted solid performances during this period. The ‘ProShares Ultra Bloomberg Natural Gas (BOIL)’, which tracks natural gas futures indices at twice the rate, rose 49.18%, and the ‘United States Natural Gas Fund (UNG)’ increased by 25.34%.

This reflects the recent sharp rise in natural gas prices in the international commodity market. Natural gas prices have faced supply shortages due to Russia reducing supply amid the Russia-Ukraine war and increased cooling demand caused by a heatwave. On the 16th (local time), the U.S. natural gas near-month futures price reached $9.329 per MMbtu (one million British thermal units), the highest since August 2008. Natural gas-related indicators also showed upward trends. During this period, natural gas futures prices on the New York Mercantile Exchange rose 25.06%, from $7.382 to $9.232. The Dow Jones Natural Gas Index, which domestic ETN products mainly track, also increased 24.81%, from 401.41 to 500.98.

The securities industry assessed that the possibility of further increases in natural gas prices cannot be ruled out. Since the invasion of Ukraine, Russia, facing various economic sanctions from the international community, has used natural gas as a weapon and started controlling supply. Jin-yi Ryu, a researcher at Hi Investment & Securities, said, "Gazprom, Russia’s state-owned gas company, announced that European gas prices could rise an additional 60% this winter compared to current levels, increasing upward pressure on natural gas prices," adding, "Russia can stop natural gas supply at any time, so the upward risk factor for natural gas prices remains."

The continued rise in natural gas prices may also affect oil prices and inflation. Researcher Ryu noted, "While oil prices have fallen 12.5% from the end of July to the present, U.S. natural gas prices have risen 14.2%," and predicted, "As natural gas prices rise, the inflation-relieving effect of falling oil prices may be somewhat offset."

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