The KOSPI index has been soaring, climbing to the 7,999 level four trading days after breaking through 7,000, but the tilt toward large caps has intensified. This is also evident in the performance of exchange-traded funds (ETF) that invest in KOSPI 200 constituents on an equal-weighted basis rather than by market capitalization. The return of equal-weighted ETFs tracking the KOSPI is only about one-third that of market-cap-weighted ETFs.
On the 13th, according to KOSCOM ETF Check, the one-month (Apr. 13–May 12) returns of the KODEX 200 ETF and the TIGER 200 ETF were 35.34% and 35.75%, respectively. Year-to-date returns are 97.45% and 98.53%, respectively.
This is due to the KOSPI index's surge. The KOSPI index rose 31.46% over the past month. Compared with the start of the year, it jumped 78.72% in about four months and 10 days. These products track an index composed of 200 stocks listed on the main board and reflected the index gains as is.
However, there are products that track the same index but have returns cut to about one-third. They are equal-weighted ETFs. Equal-weighted ETFs set similar weights for each stock regardless of market capitalization. The goal is to reduce the weight gap between No. 1 and No. 200 by market cap and diversify the risk of concentration in particular stocks.
The one-month return of the KODEX 200 Equal-Weighted ETF is 9.63%, and the year-to-date return so far is only 38.78%. The TIGER 200 Equal-Weighted ETF also delivered 8.83% for the month and 37.65% year to date. Compared with market-cap-weighted ETFs from the same companies, returns are at about one-third to one-fourth.
The gap in returns has widened as Korea's stock market has increasingly been driven by a handful of large semiconductor stocks, deepening the "large-cap tilt."
According to the Korea Exchange (KRX), as of the day, the market capitalization of the main board was 6,261 billion won, with the combined market capitalization of Samsung Electronics and SK hynix accounting for 47% of the total. Even on the previous day (the 11th), when the closing price hit a record high, 147 stocks rose on the main board, while 738—more than three times as many—fell.
An asset management industry official said, "Equal-weighted ETFs generally seek returns by including mid- and small-cap stocks with higher gains at equal weights because stocks with high market caps have typically not posted high gains," adding, "In a situation like now, where concentration is severe and only the names that are moving keep moving, rebalancing may not necessarily help."