Samsung KODEX 200 Target Weekly Covered Call, Net Assets Double in 10 Trading Days

Domestic equity covered call ETFs based on domestic assets and products with tax-exempt benefits are gaining popularity in the monthly distribution market.

Samsung Asset Management announced on the 13th that the net assets of the KODEX 200 Target Weekly Covered Call ETF have exceeded 200 billion KRW. It is the first target covered call ETF introduced domestically using the KOSPI 200, which has tax-exempt benefits, and on-exchange derivatives. After surpassing 100 billion KRW in net assets at the end of last month, it exceeded 200 billion KRW in just 10 trading days.

Monthly dividend ETFs are rapidly growing, especially in pension accounts with tax benefits. Since the foreign tax credit was abolished in January this year, eliminating the tax-saving effect, individual buying demand has flowed into the KODEX 200 Target Weekly Covered Call product. Approximately 46 billion KRW of net purchases by individuals occurred over the past 10 trading days. It ranked first among 36 covered call products listed domestically. This is an unusual trend considering the generally low investor preference for domestic equity products.

The KODEX 200 Target Weekly Covered Call aims for an annual premium return of 15% by dynamically adjusting the weekly call option selling ratio on the KOSPI 200. It is designed to allow partial participation in the index’s rise when the KOSPI 200 index increases. Monthly distributions are paid by combining the expected dividend yield of around 2% from KOSPI 200 stocks. The actual expected distribution yield reaches 17% annually. The monthly distribution payment date is the 15th of each month, and the first monthly distribution yield paid last month was 2.04%.

The reason the KODEX 200 Target Weekly Covered Call attracts individual investors is that the premium income and capital gains generated from call option selling are fully tax-exempt. Since the main asset income is tax-exempt, it draws more attention from high-net-worth individuals sensitive to comprehensive financial income taxation. Dividend income, expected at around 2% annually, is subject to dividend income tax. Investors can also participate significantly in the rise of the KOSPI 200 index. The fact that this income is also tax-exempt acts as an additional attraction for investors.

If an individual investor invests 500 million KRW in a general account and receives a pre-tax monthly distribution of about 7.1 million KRW, they can receive approximately 6.9 million KRW after deducting about 150,000 KRW in taxes. Without interest and dividend income, the investor would receive about 85 million KRW pre-tax and 83 million KRW post-tax annually from monthly distributions alone. If the same amount were invested in overseas equity or bond monthly distribution products with the same structure through a general account, comprehensive financial income taxation would apply to more than 20 million KRW of distributions over one year.

Samsung Asset Management’s manager Lee Daehwan said, "Tax is an important point for monthly dividend ETF investors," and introduced, "Since the KODEX 200 Target Weekly Covered Call has no tax on premium income and is not included in comprehensive financial income taxation, it is a product of great interest to high-net-worth individuals."

He added, "From this year, withholding tax is applied at the time of income occurrence for overseas dividend income, reducing the tax deferral and tax-saving effects of overseas products with large dividend income in pension accounts and ISAs. We expect investor interest to increase in domestic products with significant tax benefits."