The Korean ETF market recorded its first monthly decline this year as total assets under management fell from 393.7674 trillion won at the end of June to 354.6433 trillion won as of the 26th, according to data from FnGuide on the 28th. The decline coincided with a KOSPI correction that dampened domestic investor sentiment and triggered profit-taking in inverse ETFs, while some retail investors shifted funds to US-listed stocks. Despite the overall market contraction, leverage ETF assets surged from 24.2864 trillion won at the end of June to 30.1862 trillion won as of the 27th, driven primarily by single-stock leverage products tied to Samsung Electronics and SK Hynix as investors engaged in dip-buying during sharp price declines. Korean financial regulators have announced plans to raise deposit requirements for single-stock leverage ETFs in response to the concentrated speculative activity.
Korean ETF Market Records First Monthly Decline in 2024
Total assets under management for 1,150 listed Korean ETFs decreased from 393.7674 trillion won at the end of June to 354.6433 trillion won as of the 26th. The June figure represented a near-90 trillion won increase from 307.2998 trillion won at the end of April. The reversal marked the first monthly decline after consistent growth through June. AUM reflects actual investor capital inflows and outflows, distinct from net asset value which fluctuates with market prices.
The contraction occurred as the KOSPI entered a correction phase and Korean retail investors increased net purchases of US-listed ETFs and individual stocks. Inverse ETF liquidations and profit-taking also contributed to the outflows. Yoon Jae-hong, an analyst at Mirae Asset Securities, noted that "investor interest in general thematic ETFs has been sluggish."
Leverage ETF Assets Surge 5 Trillion Won in Two Months
Leverage ETF assets under management increased from 14.9223 trillion won at the end of May to 24.2864 trillion won at the end of June, then reached 30.1862 trillion won as of the 27th. The 62 leverage products represent approximately 5% of total listed ETFs by count. Monthly growth exceeded 2 trillion won in both June and July, compared to increases in the hundreds of billions of won in prior months.
The three largest July inflows all went to leverage products: KODEX SK Hynix Single Stock Leverage added 1.93 trillion won, TIGER SK Hynix Single Stock Leverage gained 1.0995 trillion won, and KODEX KOSDAQ150 Leverage increased by 1.031 trillion won. In contrast, 33 high-dividend ETFs experienced net outflows of 187.5 billion won during July.
Single-Stock Leverage Products Attract Dip-Buying Flows
Assets in 14 single-stock leverage ETFs continued to grow even as Samsung Electronics and SK Hynix stock prices declined more than 10%. Some single-stock leverage ETF prices fell to the 8,000 won range, which analysts attributed to retail investors' low-price buying and averaging-down strategies. Park Seung-jin, an analyst at Hana Securities, stated that "increased volatility can appear as an attractive environment to leverage investors."
Yoon noted that "single-stock leverage products have driven overall leverage demand growth." The concentration of capital in leverage and focused products has left other categories undersubscribed. One asset management company official said, "Investor attention is focused on leverage ETFs and concentrated products, making it difficult to attract inflows even when launching new ETFs. KOSDAQ, dividend, and defensive theme products are relatively neglected."
Regulators Announce Deposit Requirement Increase for Leverage ETFs
Korean financial authorities have announced plans to implement higher deposit requirements for single-stock leverage ETFs. Park stated that "deposit regulation strengthening could reduce some short-term investment demand," while also noting that "some investors may sell other ETFs or individual stocks to jump into Samsung Electronics and SK Hynix leverage products, potentially continuing market concentration."
FAQ
What happened to the Korean ETF market between June and July?
Total Korean ETF assets under management declined from 393.7674 trillion won at the end of June to 354.6433 trillion won as of the 26th, marking the first monthly decrease in 2024. This occurred alongside a KOSPI correction and retail investor shifts toward US stocks markets.
Why did leverage ETF assets increase during the same period?
Leverage ETF assets grew from 24.2864 trillion won at the end of June to 30.1862 trillion won as of the 27th, driven by retail investors' dip-buying and averaging-down strategies in single-stock leverage products tied to Samsung Electronics and SK Hynix as those stock prices fell more than 10%.
What regulatory measures have Korean authorities announced for leverage ETFs?
Korean financial regulators announced plans to raise deposit requirements for single-stock leverage ETFs in response to concentrated speculative activity in these products during the market volatility.
