This Year’s Energy, Interest Rate, and Bond ETF Returns Soar High

KODEX US S&P Energy Up 63.88%, Ranked 1st
Stable Products Favored Amid War, Inflation, and High Interest Rates
Internet, Gaming, Battery, and Bio Sectors Receive Worst Performance Scores

[Asia Economy Reporter Park So-yeon] While theme-based exchange-traded funds (ETFs) such as 'China' and 'electric vehicles' shone last year, this year stable ETFs related to energy, interest rates, and bonds have attracted attention. Due to the ongoing COVID-19 pandemic combined with war, inflation, and rapid interest rate hikes increasing uncertainty, funds flowed into stable products.

Rise of Energy Company-Related ETFs, Surge in Inverse Products Betting on Declining Markets

According to the Korea Exchange information data system on the 21st, the ETF with the highest return over the past year was KODEX US S&P Energy (Synthetic). This ETF, priced at 7,585 KRW as of December 20 last year, closed at 12,430 KRW on the 20th of this month, rising 4,845 KRW (63.88%) over the year. During the same period, the trading volume was 14,133,814 units, and the trading value was 158 billion KRW. Energy-related ETFs soared along with crude oil prices due to the Russia-Ukraine war. Although recently there has been downward pressure on oil prices due to the possibility of demand slowdown from an economic recession, energy-related ETFs recorded the most notable returns this year.

Following this, products betting on declining markets also surged, including KBSTAR US Long-Term Treasury Futures Inverse 2X Synthetic H (53.02%), TIGER 200 Futures Inverse 2X (52.11%), ARIRANG 200 Futures Inverse 2X (51.44%), and KOSEF 200 Futures Inverse 2X (51.45%). This is interpreted as reflecting concerns over fiscal tightening in major countries, worsening corporate earnings, and economic recession.

By trading value, KODEX 200 Futures Inverse 2X ranked first with 121.1751 trillion KRW traded over the past year. The trading volume was 41.5 billion units. Following were KODEX Leverage (97.1572 trillion KRW), KODEX 200 (56.454 trillion KRW), KODEX KOSDAQ 150 Futures Inverse (43.8876 trillion KRW), and KODEX Inverse (35.6424 trillion KRW), all actively traded.

Recently, short-term interest rate and bond-type ETFs have been rising. There has been a phenomenon of funds flowing into interest rate ETFs that can maximize profits from interest rate hikes. In particular, pension funds have sharply increased their purchases of CD rate (AAA-rated 91-day commercial bank-issued) ETFs this month. Pension funds net purchased 3.8 billion KRW worth of CD rate ETFs in October, 1.8 billion KRW in November, and suddenly increased net purchases to the 30 billion KRW range this month. This is interpreted as pension funds expecting the interest rate uptrend to continue for some time.

Also, as bond prices plunged due to consecutive interest rate hikes, the attractiveness of bond-type ETFs increased. Especially, investor interest in long-term bond ETFs has grown. Demand for safe assets has expanded due to economic slowdown, and asset management companies have introduced various bond-type ETFs, bringing the recent bond-type ETF scale close to 13 trillion KRW. Long-term bond ETFs are also gaining attention as alternatives to deposits or equity-linked securities (ELS).

Trading Suspension of Russia Index-Tracking Funds, Worst Performance by New Deal Funds

The worst-performing ETF by rate of change was TIGER KRX BBIG K-New Deal Leverage. This ETF, which started at 10,120 KRW on December 20 last year, closed at 2,965 KRW on the 20th of this month, falling 70.7%. New Deal funds were spotlighted as a core economic policy of the Moon Jae-in administration, but faced a combination of adverse factors including regime change, inflation, interest rate hikes, and stagnation in representative growth stocks such as internet, gaming, battery, and bio sectors, resulting in the worst performance.

Following were ACE Russia MSCI Synthetic (-67.83%), ACE Vietnam VN30 Futures Bloomberg Leverage H (-61.34%), TIGER KRX Internet K-New Deal (-59.61%), and KODEX KOSDAQ 150 Leverage (-58.43%), all showing sharp declines. The ACE Russia MSCI (Synthetic) ETF tracking the Russian index has been suspended from trading since March. Also, leveraged ETFs, which deliver 2 to 3 times the investment effect of regular ETFs, suffered greater losses in the declining market.

Delistings of ETFs also occurred frequently. ETF products such as KBSTAR KOSPI ex 200, Power Medium-Term Treasury Bonds, SOL Developed Countries MSCI World (Synthetic H), and KINDEX Fn K-New Deal Digital Plus were delisted.

Fields to Watch Next Year: Semiconductors, Platforms, Healthcare

Industry experts expect that after interest rates peak next year, interest in growth stocks will increase again. Considering the uncertain end of the Ukraine war and the competitive dynamics among countries over supply chain dominance, opportunities are still expected in economically sensitive sectors such as energy, semiconductors, and eco-friendly industries. Kim Jung-soo, head of the equity research division at Mirae Asset Global Investments, predicted, "Among growth stocks whose valuations have sharply declined during the rapid interest rate hike process, a recovery is expected centered on semiconductor, platform, and healthcare sectors."

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