Right after the outbreak of the Iran war, as Korea's stock market repeatedly surged and plunged, funds have been flowing into Korea-focused exchange-traded funds (ETFs) listed on the U.S. stock market. With Korea's stock market recording the highest gain among major global markets last year, foreign investor interest in ETFs that invest in Korea appears to have grown.
Some analysts also said foreign investors are giving a positive assessment of the fundamentals of Korea's stock market. Expectations are high for a recovery in the semiconductor cycle and the resulting profit increases at leading chipmakers such as Samsung Electronics and SK hynix.
On the 11th, according to Koscom Check, about $924.3 million (about 1.2477 trillion won) flowed into iShares MSCI South Korea (EWY), run by BlackRock, the largest U.S. asset manager, this month (the 3rd–6th).
EWY is a product that invests in 83 large-cap stocks listed on Korea's stock market, including Samsung Electronics, SK hynix and Hyundai Motor. In particular, the allocation to Samsung Electronics and SK hynix is high at around 40%.
The ETF is the easiest way for U.S. investors to invest in Korean corporations. For domestic corporate shares to be traded on overseas markets, American depositary receipts (ADRs) based on domestic shares must be issued, but the two corporations do not have ADRs.
During the same period, $448.77 million (about 605.8 billion won) also flowed into the leveraged product Direxion Daily South Korea Bull 3X (KORU), which tracks three times the daily move of the MSCI Korea 25/50 Index.
By contrast, during this period foreign investors were net sellers of about 7 trillion won in Korea's main board.
In the securities industry, the inflow of funds into Korea ETFs listed on overseas markets is being interpreted as a sign that foreign investors still view Korea's stock market positively. In particular, the inflow into leveraged ETFs is seen as reflecting investors' expectations for a short-term rebound in Korea's stock market.
If Middle East risks such as the Iran war ease going forward, there is also the possibility that foreign investors will expand direct buying in Korea's stock market.
Kim Jae-seung, an analyst at Hyundai Motor Securities, said, "Looking only at external variables such as the Iran war, one could say inflows are slowing in March, but passive ETF money has been coming in steadily," adding, "Because passive money tends to be long-term, it appears investors judge that the fundamentals of Korea's stock market or the semiconductor cycle have not been significantly impaired."