[Attack on ETF] New Listings Up 25%, Trading Volume Up 200%

The total number of ETFs increased from 666 at the end of last year to 757 this year
ETF average daily trading value reached 4.2253 trillion KRW, more than double the 2.0804 trillion KRW at the end of last year
ETF market surpassed 100 trillion KRW in net assets, expected to reach 300 trillion KRW by 2030

In the domestic stock market, amid the strong craze for thematic stocks such as secondary battery stocks and superconductor stocks, exchange-traded funds (ETFs) are also showing equally strong performance. Both the number of newly listed ETFs and trading volume have increased significantly compared to last year.

According to the Korea Exchange on the 18th, 94 ETFs have been newly listed from the beginning of this year until the 17th of this month. This is a 25% increase compared to the same period last year (71 ETFs). As a result, the total number of ETF listings increased from 666 at the end of last year to 757. The average daily trading value also showed a noticeable upward trend. At the end of last month, the average daily trading value of ETFs was 4.2253 trillion KRW, more than double the 2.0804 trillion KRW recorded at the end of last year.

The total net asset value (AUM) of ETFs surpassed 100 trillion KRW in June and increased by more than 3 trillion KRW within a month. As of the end of last month, the total net asset value of ETFs was 103.9774 trillion KRW, up 3.2005 trillion KRW from the previous month (100.7769 trillion KRW). Yoon Jae-hong, a researcher at Mirae Asset Securities, analyzed, "Since 2005, the number of newly listed ETFs has consistently exceeded the number of delisted ETFs, leading to a steady increase in the number of listings. With various products such as monthly dividends, overseas indices, and interest rate products, the total net asset value is also generally expanding."

Despite concerns such as the recent crisis originating from China and additional tightening by the U.S., the stock market has remained strong this year, leading to active ETF trading. The average daily trading value, which was in the 3 trillion KRW range in 2020, dropped to the 2 trillion KRW range in 2021 and 2022 but has recovered to the 3 trillion KRW range this year.

The steady growth of the ETF market is attributed to the proper alignment of supply and demand. Individual investors are increasingly turning to ETFs due to their trading convenience, low fees, and diversification benefits. The proportion of individual investors in the cumulative ETF trading volume in the first half of this year reached 50%. Kim Jae-chil, a senior researcher at the Korea Capital Market Institute, explained, "The global popularity of ETFs as indirect investment vehicles is due to their trading convenience, low investment costs, and regulatory frameworks similar to public funds." Asset management companies have continuously supplied various ETFs to meet the growing demand and attract investors. Researcher Yoon said, "The driving force behind the growth of the ETF market can be attributed to the appropriate reflection of increasingly sophisticated and diversified market demands."

Looking at newly listed ETFs, they quickly respond to changes in economic conditions and lead demand. Last year, many China-related ETFs were listed, but this year, their number has significantly decreased. Instead, ETFs related to India have increased. Last year, several ETFs related to the STAR Market (Ke Chuang Ban), known as the Chinese Nasdaq, were listed, with a focus on China's nurturing industries, secondary batteries, and metaverse-related ETFs. This year, only three ETFs were newly listed: KBSTAR China Mainland CSI300 ETF, TIGER China Electric Vehicle Leverage (Synthetic), and KOSEF China Domestic Consumption TOP CSI. The relatively sluggish performance of the Chinese stock market compared to global markets and concerns about economic slowdown are believed to have negatively impacted this trend. Instead, ETFs tracking the Nifty 50 index, which bundles blue-chip stocks from the Indian stock market, have been newly listed, emerging as an alternative investment destination to China ETFs. The Indian Nifty 50 index rose more than 6% over the past three months. The metaverse ETFs, which boomed in 2021, are on the decline. Only two were listed last year, and none appeared in the new listings this year.

The diversity of product composition is also notable. The number of interest rate-type ETFs that provide interest income is increasing. These ETFs use specific interest rates such as negotiable certificate of deposit (CD) rates, Korea Overnight Financing Rate (KOFR), and U.S. Secured Overnight Financing Rate (SOFR) as underlying indices to provide a fixed interest income. Last year, only one ETF, KODEX KOFR Interest Rate Active (Synthetic), was listed, but this year, six ETFs including KODEX CD Interest Rate Active (Synthetic) have been listed. This reflects growing interest in interest rate-type ETFs that can provide stable interest income amid increased stock market volatility. Jeon Gyun, a researcher at Samsung Securities, said, "Cash-equivalent interest rate ETFs such as those based on CD rates are widely used to temporarily avoid increased stock market volatility."

In particular, the growth of thematic ETFs is remarkable. Since the beginning of this year, secondary battery-related ETFs have been listed one after another. Recently, as bio-healthcare stocks have attracted attention, related ETFs have been consecutively listed. According to Meritz Securities, thematic and sector ETFs accounted for 39.8% of the total AUM of domestic equity ETFs. This nearly doubled from 20% at the end of 2020. Choi Byung-wook, a researcher at Meritz Securities, explained, "Although ETFs tracking representative indices such as KOSPI 200 still have larger scales, the influence of thematic and sector ETFs has expanded as their scale has grown recently. The strong stock prices of secondary battery and semiconductor stocks since the beginning of the year have increased the assets held by existing thematic ETFs, and the listing of new thematic ETFs has further increased their share." Park Woo-yeol, a researcher at Shinhan Investment Corp., said, "As interest grows in what the leading themes of the ETF market are, the number of products explicitly naming themes in their ETF titles is increasing, and supply and demand are also influenced by themes."

The rapid growth of ETFs is expected to continue for the time being. The market anticipates that the ETF market size will reach 300 trillion KRW by 2030. Researcher Yoon Jae-hong forecasted, "Based on the development path of the U.S. market, the future trajectory of the domestic ETF market is expected to include the continuous introduction and diversification of overseas-verified indices in growth and dividend sectors, expansion of lineups for growth companies, and active adoption of option strategies."

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