The value-up exchange-traded fund (ETF), which emerged in line with the government's value enhancement policy, is said to be failing to attract investor interest and is not growing as expected.
According to the Korea Exchange on the 1st, the total net worth of 12 kinds of value-up ETFs listed on the domestic market was recorded at 629 billion won as of May 29. After recording a net worth of 496.1 billion won on the first day of its listing on November 4 last year, it increased to 740 billion won within a month, but has been on a downward trend since then due to market instability and weakened policy expectations. The transaction volume of the ETFs also decreased by about 26% from 590,000 units at the end of last year to 440,000 units at the end of last month.
The value-up ETF, launched with the goal of resolving the Korea discount, tracks the 'Korea Value-Up Index,' which consists of 100 selected stocks based on criteria such as corporate revenue, shareholder returns, and capital efficiency. ETF products based on this index include passive types such as 'TIGER Korea Value-Up' and 'KODEX Korea Value-Up,' as well as active types such as 'KoAct Korea Value-Up Active' and 'TRUSTON Korea Value-Up Active.'
The value-up index itself has shown performance. Since the index was disclosed at the end of September last year, it has risen 6.73% until May 29, and has gained 14.81% since the beginning of this year. Considering that the KOSPI's gains during the same period were 2.67% and 13.38%, the trend is considered favorable. However, this performance is not translating into ETF fund inflows.
Especially in a situation where policy expectations to resolve the Korea discount are rising after the presidential election, the value-up ETF appears to be failing to capitalize on this trend. Fund inflow into ETFs should lead to rising stock prices, thereby creating a virtuous cycle where listed corporations strive to be included in the value-up index, but there are still concerns about the lack of a clear connection.
In fact, the Korea Exchange implemented the Korea Value-Up Index rebalance for the first time at the end of May, adding 27 new stocks and excluding 32, but the market's response was minimal.
Bae Cheol-kyo, a researcher at NH Investment & Securities, noted that "given the current size of capital tracking the Korea Value-Up Index is small, it is difficult to expect passive (index tracking) supply effects" and added that "interest in shareholder returns, such as the promotion of amendments to the Commercial Act in the future, should increase for interest in the included stocks to rise."