A sharp drop in South Korea's stock market has cut the total net assets of the country's exchange-traded fund market by more than 110 trillion won from its record high, leaving it in the 410 trillion won range. The market, which topped 500 trillion won on the back of a first-half rally, has shrunk more than 20% in just four months. Investors are buying products that bet on an index rebound and money market products that park idle cash at the same time, while asset managers are turning to ETFs that invest overseas.
Net assets in the domestic ETF market stood at 416.7624 trillion won, according to the Korea Exchange on the 25th. That is down 112.0131 trillion won, or 21.18%, from the record high of 528.7755 trillion won on June 19. The total is still nearly 120 trillion won higher than at the end of last year, when it stood at 297.2704 trillion won, but it has fallen by about a fifth from its peak in roughly four months. The ETF market crossed the 500 trillion won mark during the first-half rally, but the recent plunge in share prices sharply reduced the valuation of assets held in the funds. Individual investors bought a net 80.0191 trillion won worth of ETFs this year through the 23rd.
A gap in performance between domestic and overseas markets briefly changed the ranking of the largest ETF. Based on the closing price on the 15th of this month, TIGER U.S. S&P 500 held net assets of 21.0144 trillion won, overtaking KODEX 200 at 20.6848 trillion won to become the largest ETF in the country for the first time in about eight months. At the end of June, KODEX 200 stood at 28.8249 trillion won, far ahead of TIGER U.S. S&P 500 at 20.0333 trillion won, but the gap narrowed as U.S. equities rallied and Korean stocks struggled.
Even as the market contracted, money kept flowing into funds betting on a rebound in Korean stocks. KODEX 200 drew 1.1036 trillion won over the week through the 23rd, the largest inflow of any ETF. TIGER 200 attracted 316.1 billion won, bringing combined inflows into the two products to 1.4197 trillion won. The two funds returned minus 0.57% and minus 0.34% over the same period, suggesting that investors viewed the index decline as a chance to buy at lower prices.
Leveraged products that make aggressive bets on an index rebound also drew money. KODEX Leverage took in 357.3 billion won and KODEX KOSDAQ 150 Leverage 284.2 billion won, while KODEX Semiconductor Leverage attracted 128.9 billion won. The three funds returned minus 1.50%, minus 1.25% and minus 10.62% over the period. Investors appear to be wagering on a recovery in the indexes and the semiconductor sector, which had fallen the most, through products that track twice the daily return.
At the same time, cash piled into parking-type products for investors waiting for an entry point. KODEX Money Market Active drew 608.3 billion won and RISE Money Market Active 133.9 billion won. Demand to buy the dip after the plunge is coexisting with demand to park money in short-term instruments and wait.
With uncertainty growing in the domestic market, new products launched by asset managers have tilted toward overseas investment in the second half. KODEX U.S. AI Agent Active invests in key companies in the U.S. AI agent ecosystem, while Mighty U.S. Physical AI Active targets U.S. physical AI companies. KODEX U.S. Dividend Dow Jones Active is an actively managed fund built around U.S. dividend growth stocks.
Global products have also increased in semiconductors and electronic components. SOL Global DRAM Semiconductor Plus invests in core global DRAM chipmakers including Samsung Electronics, SK hynix and Micron Technology of the U.S. ACE U.S. CPU Semiconductor TOP3+ and 1Q Nvidia Fixed U.S. AI Semiconductor hold U.S. chip companies, while TIGER Global MLCC & Substrate invests in electronic component, materials and substrate makers in South Korea, Japan and Taiwan.
"As volatility increases, the ways investors manage their money are becoming more diverse," an asset management industry official said. "Fund houses are also expanding their product lineups to widen the range of overseas market options."