Korea Exchange Announces 9 New Indexes Reflecting Differentiated Investment Strategies by Market Conditions

The Korea Exchange announced on the 22nd that it will release nine derivative strategy indices on the 26th of this month to respond to market uncertainties and diverse investment demands.

Korea Exchange, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

First, there are two types of 'Monthly Leverage Indices' that reflect twice the cumulative monthly returns based on KOSPI 200 and KOSDAQ 150 index futures, and two types of '1.5X Leverage Indices' that reflect 1.5 times the daily returns. The two Monthly Leverage Indices can improve performance compared to existing daily leverage indices in fluctuating markets. The two 1.5X Leverage Indices are suitable for rising markets with fluctuations and are expected to yield excess returns compared to 1X and 2X indices. Since 2016, the cumulative return of the KOSPI 200 futures leverage 1.5X index (87.37%) has been higher than the underlying index (49.19%) and similar to the leverage index (90.11%). During the same period, the cumulative return of the KOSDAQ 150 futures leverage 1.5X index (55.33%) recorded the highest return compared to the underlying index (46.18%) and the leverage index (23.37%).

Additionally, there is the 'Semiconductor Leverage Index' reflecting investment demand seeking excess returns due to expectations of improvement in the semiconductor industry. The 'KRX Semiconductor Leverage Index' is a strategy index that tracks twice the daily returns of the underlying KRX Semiconductor Index. Although this index has shown high volatility since 2019 due to the characteristics of leverage indices, it demonstrated superior performance with a cumulative return (139.69%) compared to the underlying index (105.38%).

Also announced were four types of indices including Korea's first ETF futures index linked to the return of Nasdaq 100 ETF futures prices listed on the futures market, and leverage/inverse strategy indices (2X, -1X, -2X) based on it. Since these indices are based on ETF futures, which are exchange-traded derivatives, they provide tax-exempt benefits, allowing investors to choose various investment strategies according to market conditions.

A Korea Exchange official said, “Through the development of these new indices reflecting differentiated investment strategies and market demand according to each market situation, we expect a variety of innovative financial products to be launched, contributing to the growth and activation of related markets.” He added, “We will satisfy diverse investment demands according to market conditions by supplying financial products such as ETFs through the development of strategy indices applying new concepts and advanced methods.” Furthermore, he stated, “The Korea Exchange will continue to actively strive to develop advanced indices applying new concepts and sophisticated methodologies.”