As the won-dollar exchange rate has fallen to its lowest level in more than two years, brokerages are reviving marketing for overseas equity exchange-traded funds, a business that shrank late last year when the won weakened sharply. Brokerages and asset managers are offering investment incentives centered on domestically listed ETFs that track major U.S. indexes, stepping up efforts to capture demand for overseas investment.
Korea Investment & Securities has included three domestically listed ETFs that invest in the U.S. stock market in its "ETF accumulation" promotion running this month, according to the financial investment industry on the 23rd. The three are ACE U.S. S&P 500, TIGER U.S. S&P 500 U.S. Treasury Mixed 50 and KIWOOM U.S. S&P 500 Momentum, products that either track the main U.S. index or hold both U.S. stocks and bonds. The benefits go to clients who buy ETFs listed on the Korean market rather than investing directly in U.S. stocks.
Eugene Investment & Securities has also broadened its promotion to include overseas ETFs starting this month, offering benefits based on net purchases to clients with brokerage-type individual savings accounts (ISAs) and pension savings accounts. In the third quarter, the promotion covered only newly listed ETFs investing in Korean stocks, but it now extends to products tracking overseas assets. Five brands — KODEX, KIWOOM, SOL, RISE and KoACT — are taking part, and all of each firm's domestically listed ETFs are eligible except single-stock leveraged products.
Asset managers, not just distribution channels, are also running their own promotions for overseas ETFs. Samsung Asset Management this month launched an event for new purchases of an actively managed U.S. dividend ETF, along with a promotion for clients who verify holdings of major U.S. index and dividend ETFs. Korea Investment Management and Mirae Asset Global Investments are running verification events for regular installment purchases centered on their U.S. benchmark index ETF lineups, and Hana Asset Management is operating a net-purchase event for the same type of ETF through the end of the year.
The industry mood surrounding overseas investment marketing is also showing signs of change. Late last year, as the won's weakness deepened, the Financial Supervisory Service put a brake on brokerages' new cash-based events and advertising tied to overseas investment. The regulator also moved toward banning cash rewards proportional to transaction value, seeing them as a potential driver of excessive trading. Brokerages have scaled back overseas stock promotions since then, but with the won-dollar rate down to the mid-1,320 range, they are again competing for retail investors in U.S. stocks through ETFs.
A sharp correction in the KOSPI has also cooled investor appetite for ETFs tied to the Korean market, another factor behind the shift. Korean equity ETFs ranked first in monthly net inflows every month from January through July, according to Koscom's ETF CHECK. In August, however, TIGER U.S. S&P 500 took the top spot, and ETFs tracking major U.S. indexes accounted for four of the five largest inflows. Last month, KODEX Money Market Active ranked first, with two U.S. index-tracking ETFs and two interest-rate ETFs filling out the rest of the top five.
Industry officials say the financial authorities' official stance urging restraint in overseas stock marketing remains in place. "Our understanding is that the existing guidance on advertising related to overseas stocks is still in effect," an official at a brokerage marketing division said. "For ETFs listed in Korea that track overseas assets, we are continuously monitoring how asset managers are conducting their marketing."