[ETF Investment Clock] Foreigners Return... But Institutions Are the Ones Betting on a Rise

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Last week, institutional investors alone bet on the rise of the domestic index in the Korean stock market. This trend contrasts with foreign investors, who supported the index with large-scale buying during the same period.

On the 25th, Asia Economy examined the trading trends by investor type for domestic Exchange-Traded Funds (ETFs) listed in Korea from the 18th to the 22nd. It was found that individual and foreign investors mainly held inverse ETFs. Inverse ETFs are products that track the index inversely, meaning they profit as the index falls.

Individuals made the largest net purchase of 94.2 billion KRW in Samsung Asset Management's 'KODEX 200 Futures Inverse 2X.' This ETF is a so-called 'double inverse' product that tracks the KOSPI 200 futures index at twice the inverse. Additionally, individuals added ETFs that inversely track domestic stock indices to their portfolios, including 'KODEX Inverse' (5th), 'KODEX KOSDAQ 150 Futures Inverse' (8th), and 'TIGER 200 Futures Inverse 2X' (10th).

Foreign investors showed similar trading behavior to individuals. They also made the largest net purchase in 'KODEX 200 Futures Inverse 2X.' Other inverse products such as 'TIGER 200 Futures Inverse 2X' appeared consecutively among the 3rd to 6th most net purchased stocks by foreign investors.

In contrast, the top net purchase by institutions was 'KODEX Leverage.' This leverage ETF tracks the KOSPI 200 index at twice the rate, generating double the returns when the index rises. This suggests that institutions strongly bet on the rise of the domestic index. Other ETFs that track the index directly, such as 'KODEX KOSDAQ 150 Leverage' (2nd), 'KODEX KOSDAQ 150' (4th), and 'KODEX 200' (5th), also ranked high among institutions' net purchases.

This is the opposite result to foreign investors who supported the index with large-scale buying last week. Reviewing the trading trends by investor type in the KOSPI market during this period, foreign investors showed net buying every day except one. They purchased a total of 1.1207 trillion KRW over the week. Meanwhile, institutions sold every trading day, showing the largest net selling among investor types, with net sales amounting to 820.5 billion KRW. Individuals also showed net selling of 342.5 billion KRW last week.

It is estimated that institutions, which had realized profits through large-scale selling in the domestic market, are now betting on the index's rise. Conversely, foreign investors who have been buying in the domestic market still appear to favor downward bets.

However, since the KOSPI partially recovered from previous declines last week, institutions betting on the index's rise posted the best performance. The average price change rate of the top 10 ETFs net purchased by institutions was a solid 5.73%. In contrast, foreign and individual investors, who concentrated their investments in inverse ETFs, experienced average price declines of -0.20% and -2.90%, respectively.