As the domestic stock market continued to swing wildly due to the Iran war, a shift was detected in which individual funds that had flocked to exchange-traded funds (ETFs) were concentrating on single names. Money is still flowing into ETFs, but investor preference has grown for investing directly in individual stocks rather than ETFs that hold multiple names.
According to the Korea Exchange (KRX) on the 30th, from the start of the month through the 27th, individual investors recorded net ETF purchases of 6.7269 trillion won. That is more than 3 trillion won less than in Feb. (9.8657 trillion won). Compared with Jan., when the figure was 14.9765 trillion won, it fell by about 9 trillion won (55.1%). As net buying eased, ETF net worth also dropped to 372.4502 trillion won on the 27th from 387.6420 trillion won last month, a decrease of more than 15 trillion won.
Although net buying shrank, interest in ETFs remains intact. The combined buy and sell transaction amount for individual ETFs in Mar. was 228.7707 trillion won, exceeding 200 trillion won. That tops 182 trillion won in Jan. and 196 trillion won in Feb. Funds continue to flow into ETFs, but that is not translating into buying sentiment.
By contrast, the buying frenzy for individual stocks remains at an "all-time" fever pitch. Through the 27th of this month, individual investors posted net purchases of 30.2345 trillion won on the main board, the largest monthly net buying on record. The strategy of directly selecting specific stocks is gaining traction over diversified investing through ETFs.
Analysts say individual buying is flocking to single names on the view that individual stocks will recover faster than ETFs in a war-driven volatile market. Because individual stocks are more volatile than ETFs that hold multiple names, investors expect bigger gains in a rebound.
In fact, for semiconductor names, individual stocks outperformed ETFs in terms of gains up to the war. Samsung Electronics rose 68.5% on a closing-price basis from 128,500 won on Jan. 2 to 216,500 won on the 27th of last month, before the Iran war. That beat the gains of semiconductor-related ETFs with the No. 1 and No. 2 net worth aggregates, "TIGER Semiconductor TOP10" (66.7%) and "KODEX Semiconductor" (61%). Many expect this trend to continue even after the current bout of volatility.
A researcher in charge of investment strategy at a securities firm said, "As many individual names within the KOSPI have fallen, their investment appeal has increased, and even conservative investors are showing a tendency to try to quickly recoup returns in a rebound through individual stock investing rather than ETFs," adding, "In a volatile market, individual investors tend to respond to the KOSDAQ with index-tracking ETFs and to the KOSPI with individual stock investing."
However, with war risks not fully cleared, experts recommend diversified investing over individual stock picks.
Heo Jae-hwan, a researcher at Eugene Investment & Securities, said, "As volatility became extremely high in Mar., individual buying is appearing sporadically, moving away from ETF investing that chases directionality," adding, "Rather than investing in highly volatile individual stocks, diversified investing is effective as a way to defend returns."