ETF Performance: Struggles in the US vs. Gains in China

[Asia Economy Reporter Junho Hwang] Domestic exchange-traded funds (ETFs) investing in the US and China are experiencing mixed fortunes. While US ETFs are falling like autumn leaves due to inflation and monetary policy normalization, Chinese ETFs are showing a rebound after a period of struggle.

According to the Korea Exchange on the 26th, the 1-month returns of leveraged products KODEX and TIGER, which invest in the US Nasdaq 100, were -22.84% and -21.76%, respectively. ETFs investing in US IT companies such as KINDEX US IT Internet S&P (-18.40%), TIGER Global Cloud Computing INDXX (17.30%), and TIGER Global Cybersecurity INDXX (15.92%) recorded lower returns than leveraged products related to one of the major US indices, the S&P 500 (TIGER US S&P 500 Leverage -15.45%).

Jung Sung-in, head of the ETF Strategy Department at Korea Investment Trust Management, stated, "This is the result of adjustments to large US IT stocks, which had been recognized for high growth potential and maintained high valuations, due to the US's aggressive tightening policies." He added, "Whether inflation subsides will have a major impact on the direction of US tech stocks, and the price direction of stocks will be determined by the direction of market interest rates related to this."

While ETFs investing in the US have weakened, Chinese ETFs have succeeded in rebounding this month. In particular, ETFs related to renewable energy have recorded the highest growth rates among all ETFs. These include SOL China Solar CSI (13.37%), TIGER China Clean Energy SOLACTIVE (9.58%), and KODEX China Secondary Battery MSCI (8.47%).

Kim Jung-hyun, head of the ETF Management Center at Shinhan Asset Management, explained, "Following China's easing of city lockdown measures, interest rate cuts, and economic stimulus policies, expectations have risen. Additionally, Europe has presented clear renewable energy generation capacity targets to reduce dependence on Russian energy, highlighting the attractiveness of China, the world's factory, especially in solar energy."