'Inverse ETF' Thriving Alone in a Bear Market

Investors Bet on Decline Amid New Coronavirus Impact... Sweeping Top Returns in the Past Two Weeks

[Asia Economy Reporter Song Hwajeong] As the stock market continues to weaken due to the novel coronavirus infection (Wuhan pneumonia), inverse exchange-traded funds (ETFs) betting on a declining market have recorded high returns.

According to the Korea Exchange on the 4th, inverse ETFs swept the top ranks in returns over the past two weeks from the 20th of last month to the day before. KODEX WTI Oil Futures Inverse (H) recorded a return of 12.97%, ranking first, followed by TIGER Oil Futures Inverse (H) with 12.93%. In addition, inverse ETFs that can earn double profits when the KOSPI 200 futures index falls, such as ARIRANG 200 Futures Inverse 2X (12.81%), KBSTAR 200 Futures Inverse 2X (12.75%), TIGER 200 Futures Inverse 2X (12.66%), KOSEF 200 Futures Inverse 2X (12.65%), and KODEX 200 Futures Inverse 2X (12.53%), recorded returns in the 12% range. TIGER China CSI300 Inverse (Synthetic) (10.99%) and KBSTAR China H Futures Inverse (H) (10.13%) also posted double-digit returns, making it into the top 10 in returns.

The strong performance of inverse ETFs is interpreted as investors betting on a decline due to the expected negative impact of the novel coronavirus on oil demand, as well as the Chinese and domestic stock markets.

On the previous day (local time), West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange fell 3% compared to the previous day, dropping below $50 during the session. Oil prices have been declining recently due to reduced global demand and concerns over slowing world economic growth caused by the spread of the novel coronavirus. WTI, which rose to $63 on the 6th of last month, has since continued to fall, with a drop of 20%.

The domestic stock market, which inevitably is influenced by China?expected to suffer economic growth setbacks this year due to the novel coronavirus?is also expected to continue weakening, and related inverse ETFs showed strong performance. Seung Eun Jeong, a researcher at Yuanta Securities, said, "The Chinese stock market, where growth rate decline is expected, and the Korean stock market, where the effect of lifting the Hanhanryeong (ban on Korean Wave) is delayed and concerns over global supply chain disruption are rising, will be relatively more affected."