Clipart Korea
Retail investors’ net purchases of exchange-traded funds in South Korea have shrunk to levels last seen in early 2024, just before the domestic stock market rally began, even as the KOSPI rebounded in August. Demand for newly listed ETFs also weakened, with only three of the 28 products launched in July and August drawing more than 10 billion won in net retail buying. The reduced flows concentrated in a handful of popular products, including benchmark index and covered-call funds.
Daily average net retail buying of domestically listed ETFs totaled 118.8 billion won in August, according to Korea Exchange data released on the 4th. That marks an 82.5% plunge from 678.3 billion won in June, a drop unfolding over just two months. Daily average net buying had already fallen to 399.4 billion won in July, then declined a further 70.3% in August. The August figure is close to the 139.4 billion won recorded in January of last year, before the market rally gained momentum.
The second-half slowdown in ETF net buying reflects a deceleration in the large inflows that poured in during the first-half market advance, analysts said. The investment enthusiasm cooled quickly in particular after the KOSPI fell more than 20% over the course of July. Regulations on leveraged ETFs that took effect at the end of July also curbed short-term investment demand. Total ETF trading value likewise peaked in June and July before falling in August to levels seen at the start of the year.
Retail investors have also grown more selective about newly listed ETFs. Of the 28 ETFs listed in July and August, only three drew more than 10 billion won in net retail buying since listing: KODEX 200 Covered Call Active, ACE Semiconductor PLUS Strategic Industry and DS KOSDAQ Active.
Even as overall net buying shrank, money flowed into Korean and U.S. benchmark index and covered-call ETFs. Over the one month through the 3rd of this month, from Aug. 4 to Sept. 3, TIGER U.S. S&P 500 led net retail buying with 643.7 billion won in inflows. KODEX U.S. Nasdaq 100 and KODEX U.S. S&P 500 followed with 381.9 billion won and 354.4 billion won, respectively, while TIGER U.S. Nasdaq 100 posted 267.2 billion won in net buying.
U.S. benchmark index ETFs all posted negative returns over the past month, however, weighed down by currency effects including a stronger won. TIGER U.S. S&P 500 and KODEX U.S. S&P 500 returned minus 3.22% and minus 3.21% over the period, respectively. KODEX U.S. Nasdaq 100 and TIGER U.S. Nasdaq 100 fell 2.82% and 2.81%, respectively.
Covered-call products built on domestic benchmark indexes also ranked near the top. KODEX 200 Covered Call Active, which tracks the KOSPI 200, drew 303 billion won over the same period, ranking fourth overall. Net retail buying reached 205.8 billion won for TIGER Dividend Covered Call Active and 174.2 billion won for KODEX 200 Target Weekly Covered Call. Covered-call ETFs hold stocks while selling call options, using the premiums collected to fund regular distributions. The appeal of relatively stable cash flow even when market momentum slows or volatility rises appears to have drawn investment demand.