Divergent Secondary Battery ETF Returns... Tesla Benefits from Trump's Election, Electric Vehicles Suffer

Tesla-Inclusive ETFs See Higher Returns Due to Elon Musk Effect
Electric Vehicle Industry Still in Slump... "Demand Stagnation Continues"

The returns of exchange-traded funds (ETFs) related to secondary batteries are showing extreme divergence. Related ETFs are benefiting as Elon Musk, CEO of Tesla, contributed to the re-election victory of Donald Trump, the President-elect of the United States. On the other hand, other secondary battery ETFs continue to struggle due to ongoing concerns such as the chasm (temporary demand stagnation) in the electric vehicle market.

According to the Korea Exchange on the 14th, as of the previous day, the one-month return of ACE Tesla Value Chain Active was 28.60%, the highest among domestically listed ETFs. Following that, RISE Secondary Battery TOP10 Inverse (Synthetic) recorded 23.09%. Additionally, ACE G2 Electric Vehicle & Autonomous Driving Active and TIGER Tesla Bond Mixed Fn posted returns of 12.93% and 12.53%, respectively.

RISE Secondary Battery TOP Inverse (Synthetic) tracks the daily return of the iSelect Secondary Battery TOP10 Index at a negative (-) 1x multiple. When the secondary battery index rises, the return falls. In other words, profits were generated as the iSelect Secondary Battery Index declined. Along with this, KODEX Secondary Electronics Industry Leverage and TIGER Secondary Battery TOP10 Leverage all fell by more than 20%.

The reason for the differing returns even among electric vehicle-related ETFs is Tesla. Returns were divided depending on whether Tesla was included in the ETF or not. The ACE Tesla Value Chain Active ETF holds 16.8% of DIR DAILY TSLA BULL 1.5X ETF and 16.3% of Tesla, respectively. Also, ACE G2 Electric Vehicle & Autonomous Driving Active includes 22.23% Tesla, and TIGER Tesla Bond Mixed Fn holds 29.79%.

On the other hand, KODEX Secondary Electronics Industry Leverage's main portfolio includes POSCO Holdings, LG Chem, and Samsung SDI. Its underlying index is the FnGuide Secondary Battery Industry Index. Also, TIGER Secondary Battery TOP10 Leverage mainly consists of domestically listed stocks.

Elon Musk, CEO, played a significant role in Tesla's rise. During the U.S. presidential election period, Musk donated $120 million (approximately 168 billion KRW) to the Trump campaign, supporting President-elect Trump. Furthermore, with Trump appointing Musk as the head of the 'Department of Government Efficiency,' expectations for benefits are growing.

An industry insider said, "Musk took the lead in campaigning for Trump during the U.S. presidential election, and due to the expectation of benefits, Tesla is showing high volatility," adding, "There seems to be an expectation that the businesses Musk is involved in will gain momentum." He continued, "As shown in the recent earnings announcement, Tesla is a company that ultimately demonstrates growth potential even in crises, which also plays a part."

On the other hand, other electric vehicle-related ETFs are still affected by concerns over shrinking electric vehicle demand. Additionally, negative outlooks due to Trump's election have also contributed to worries. Samjong KPMG recently forecasted in a report that Trump's election could impact automobile and secondary battery industries by increasing tariffs on finished car exports and reducing electric vehicle tax credits under the Inflation Reduction Act (IRA), potentially damaging automobile exports to the U.S. A representative from an asset management firm explained, "Concerns about a chasm in the electric vehicle market continue," adding, "The main reasons are downward adjustments in the earnings and valuations of secondary battery-related stocks."