The South Korean ETF market recorded net assets of 437 trillion won as of July 20, down approximately 100 trillion won from the record high of 533 trillion won reached on May 22, according to fund evaluation company KG Zeroin. The decline occurred as the domestic stock market plunge reduced both fund inflows and the valuation of ETF holdings, with leverage products experiencing the steepest contractions. Leverage ETFs, which amplify daily returns of underlying assets by a factor of two, demonstrated structural vulnerabilities during the downturn, with some products losing half their net asset value during the one-month period.
KODEX and TIGER ETFs Record Multi-Trillion Won Asset Declines
KODEX 200, the largest ETF by assets under management in the Korean market, saw its net assets decline by over 9 trillion won during the period from June 22 to July 20. TIGER Semiconductor TOP10, ranked sixth by asset size, lost more than 4 trillion won in net assets over the same timeframe.
Leverage products experienced more severe contractions. KODEX Leverage net assets fell from 10.8 trillion won to 5.3 trillion won, a reduction of approximately 50 percent. Fourteen single-stock leverage ETFs tracking Samsung Electronics and SK Hynix with 2x daily returns saw combined net assets drop from 16 trillion won to 8.5 trillion won during the measurement period.
The Korean ETF market had grown rapidly prior to the decline. Net assets surpassed 100 trillion won in June 2023, reached 200 trillion won in June of the following year, and crossed 400 trillion won in April before hitting the 500 trillion won milestone 42 days later in May.
Individual Investors Net Purchase 13 Trillion Won Despite Market Contraction
Individual investors net purchased approximately 13 trillion won worth of ETFs during the one-month period when the market contracted by 100 trillion won. The data indicates continued capital inflows from retail participants even as overall market valuations declined.
Han Su-jin, a researcher at Samsung Securities, stated: "Even in situations where market volatility expands, ETFs continue to attract fund inflows and are establishing themselves as core investment vehicles for asset management. The introduction of fund-type retirement pensions and other factors make it highly likely that demand for long-term investment products including ETFs will increase."
The Korean stock market posted gains on July 21 and July 22, with the KOSPI rising 3.56 percent and 0.74 percent respectively. ETF net assets reached 448.8 trillion won as of the closing price on July 22, remaining below the 500 trillion won level.
FAQ
What caused the Korean ETF market to lose 100 trillion won in net assets?
The decline resulted from the domestic stock market plunge between May 22 and July 20, which reduced both fund inflows and the valuation of stocks held within ETF portfolios. Leverage ETFs, which magnify daily returns by a factor of two, experienced particularly steep asset contractions during the downturn.
How much did individual investors purchase in Korean ETFs during the market decline?
Individual investors net purchased approximately 13 trillion won worth of ETFs during the one-month period from June 22 to July 20, even as overall market net assets contracted by 100 trillion won. This indicates continued retail capital inflows despite declining market valuations.
