Even The Elderly Next Door Are Glued to Stock Apps... ETFs With Over 3 Trillion Won in Net Assets Surge 2.3 Times in a Year [Personal Finance Barometer]

From 10 a Year Ago to 23 Now on the Back of the Bull Market
Trend Shift from Short-Term Cash Products to Index ETFs
Current No. 1 "KODEX 200", No. 2 "TIGER U.S. S&P 500"
"KODEX Kosdaq 150" Sees Net Inflow of 3.5 Trillion Won in January Alone

As the stock market continues to boom at an unprecedented level, exchange-traded funds (ETFs) are also growing rapidly. The total net assets of ETFs, which surpassed 300 trillion won on January 5, have increased by 50 trillion won in about one month. In particular, index ETFs have shown remarkable growth on the back of the strong equity market. KODEX 200, which has risen to No. 1 in ETF net assets, is on the verge of surpassing 15 trillion won in net assets.

According to the Korea Exchange on February 5, there were 23 ETFs with net assets of 3 trillion won or more as of February 3. This is 2.3 times higher than a year earlier. A year ago, there were only 10 ETFs whose net assets exceeded 3 trillion won.

The number of ETFs with net assets exceeding 10 trillion won has also increased. While there were no ETFs with net assets over 10 trillion won a year ago, KODEX 200 and TIGER U.S. S&P 500 now have net assets of 14.9681 trillion won and 14.5063 trillion won, respectively, both exceeding 10 trillion won.

The top ETF by net assets has also changed. A year ago, the ETF with the largest net assets was KODEX CD Rate Active (Synthetic), with 8.9554 trillion won in net assets at the time. Now, KODEX 200 holds the top spot. KODEX 200 ranked fourth a year ago with 5.5701 trillion won in net assets, but as the domestic stock market strengthened, its net assets swelled, lifting it to No. 1 and putting it on the brink of surpassing 15 trillion won. A Samsung Asset Management official explained, "As the KOSPI broke through the 5,000 level and demonstrated the underlying strength of the domestic stock market, funds seeking to invest in high-quality large-cap stocks that are driving the index higher flowed en masse into KODEX 200."

Trends in ETF products have also shifted. Investors are moving from so-called "parking-type" ETFs, which are used to park cash for the short term much like parking a car and taking it out again, to "equity-type (index-type)" ETFs that seek returns in line with stock market movements. Parking-type ETFs are linked to negotiable certificate of deposit (CD) rates and ultra-short-term bonds, and are characterized by the fact that interest accrues even if funds are deposited for just one day. KODEX CD Rate Active (Synthetic), which had the largest net assets a year ago, is a representative parking-type product in which interest income accumulates daily in line with the 91-day CD rate. In addition, products such as TIGER CD Rate Investment KIS (Synthetic) (No. 3), KODEX Money Market Active (No. 5), KODEX KOFR Rate Active (Synthetic) (No. 7), and TIGER KOFR Rate Active (Synthetic) (No. 9) meant that a year ago, 50% (5 out of 10) of ETFs with net assets of 3 trillion won or more were parking-type products.

By contrast, this year more than half of the 23 ETFs with net assets of 3 trillion won or more were equity-type ETFs. This is because a large volume of funds has flowed into equity-type ETFs that track stock market trends. As of February 3, 65.2% (15) of the ETFs with net assets of at least 3 trillion won this year fell into this category. In particular, as the domestic stock market heated up with the "Ocheonpi" (KOSPI 5,000) and "Cheonsdaq" (KOSDAQ 1,000) rallies, products that invest in the domestic stock market have grown more popular. At the end of last year, TIGER U.S. S&P 500, which tracks the U.S. S&P 500 Index, ranked No. 1 in ETF net assets, but in just two months, KODEX 200, which tracks the KOSPI 200 Index, has taken the top spot. Since last month, as the KOSDAQ has begun to surge sharply, KODEX KOSDAQ 150 has climbed up to seventh place in net assets. KODEX KOSDAQ 150 alone saw its net assets increase by nearly 3.5 trillion won in January, recording the largest net asset increase for the month.

The asset management industry believes that equity-type ETFs have grown significantly as investors seeking returns have flocked to the market amid the stock market boom. An asset management industry official explained, "At first, ETFs linked to both the domestic and U.S. stock markets grew together because conditions were favorable in both markets, but recently the domestic market has been such a strong bull market that domestic equity-type products are expanding in size at a much faster pace." The official added, "As the KOSPI and KOSDAQ indexes have risen sharply, products that track those indexes have delivered strong performance, and as investors see those returns, net buying and net assets continue to increase, creating a virtuous cycle."

Nam Yongsoo, Head of ETF Management at Korea Investment Management, analyzed, "Expectations for the growth potential of Korea's key industries, including not only artificial intelligence (AI) and semiconductors but also shipbuilding and nuclear power, together with improving investor sentiment driven by the rising domestic stock market, have fueled a more aggressive investment trend. This appears to have led to a shift of funds from parking-type ETFs to index ETFs."

The growth of thematic ETFs is also noteworthy. Thematic ETFs such as TIGER Semiconductor TOP10 (4.9453 trillion won) and ACE KRX Gold Spot (4.8593 trillion won) have also joined the ranks of products with a market capitalization of more than 3 trillion won. This is seen as a result of increased investment demand for semiconductor stocks, which are driving the rise in the domestic stock market, and for gold, which has been on an upward trend since last year.

Regarding future ETF investment, Nam said, "In the past, when liquidity was abundant in a low-interest-rate, low-inflation environment, the trickle-down effect led to a broad-based rise in stock prices across industries. In contrast, today the gaps between sectors and industries are becoming very pronounced," and added, "Rather than investing in turnaround stocks or stocks that simply look undervalued, it is better to selectively invest in companies that are actually increasing their sales and growing."