In Aug., signs have emerged that, for the first time this year, money is set to leave Korea's stock-focused exchange-traded funds (ETFs). As volatility in the domestic stock market grows and regulations tighten on single-stock leveraged products, some investment funds exiting domestic assets are moving into overseas ETFs.
On the 11th, according to Koscom CHECK and Samsung Securities, 410 billion won flowed out of the domestic ETF market from the 3rd to the 6th. In particular, while 715 billion won left ETFs investing in domestic assets, 323 billion won flowed into overseas-asset ETFs.
This is the first time this year that outflows have appeared in Korea's stock-focused ETFs. Over the previous seven months, an average of 8.5 trillion won per month flowed into domestic stock ETFs. Even last month, when market volatility was high, there was a net inflow of 14 trillion won. Broadening to the entire ETF market, 19.2 trillion won flowed in during July alone.
The outflow from domestic ETFs appears to have been influenced by tighter regulations on single-stock leveraged products. Since financial authorities strengthened entry rules on July 31 for single-stock leveraged products using Samsung Electronics and SK hynix as underlying assets, 290 billion won has left Samsung Electronics leveraged products and 720 billion won has left SK hynix leveraged products this month.
By contrast, money continues to flow into overseas-asset ETFs. After a 510 billion won inflow last month, there has been a net inflow of 323 billion won so far this month.
Jeon Gyun of Samsung Securities said, "Some of the money that left domestic assets has flowed into overseas assets," and noted, "As the U.S. stock market has hit a record high in Aug. and maintained a strong run, demand for overseas-asset ETFs, centered on overseas stocks, has expanded."
However, not all products in domestic stock-focused ETFs saw outflows. KOSDAQ-related ETFs have attracted 131 billion won so far this month. Analysts say funds seeking bargain buys moved as KOSDAQ's rebound has been larger than KOSPI's recently.
Jeon said, "While KOSPI has been weak, relatively stronger technical rebound momentum has appeared, and it seems inflows into KOSDAQ ETFs have been active as bargain hunting."
Covered-call ETFs are also continuing to attract funds. In particular, last month, when volatility was high, covered-call ETFs drew 1.5 trillion won, the most this year. As they can reduce some downside risk while earning income through option premiums, investors appear to have turned to them as an alternative in a more volatile market.