ETF Market Nears 500 Trillion Won as It Becomes a Key Driver of KOSPI's Rise to the 8,000 Level

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[The Financial News] Amid a booming stock market, the exchange-traded fund (ETF) market is closing in on the "500 trillion won era." As ETFs exert greater influence on the stock market, expectations are rising that they will help support KOSPI's move to the 8,000 level.
According to the Korea Exchange (KRX) on the 26th, the total ETF market capitalization stood at 494.4031 trillion won as of the close that day. Net asset value data, which reflects the actual value of ETFs, is released the following morning, but it is expected to be at a similar level to market capitalization.
Market capitalization refers to the number of ETF shares issued multiplied by the market price. Net asset value means the net assets remaining after subtracting management fees, liabilities and other costs from the assets held by the ETF.
As of the 22nd, total ETF net assets were estimated at 484.7717 trillion won. That was up 12.80% in just one month, from 429.7552 trillion won at the end of last month.
ETFs have shown rapid growth this year. Since the market launched in October 2002, it took about 21 years for ETF net assets to exceed 100 trillion won in June 2023. They then topped 200 trillion won in June last year, crossed 300 trillion won in early January this year, and surpassed 400 trillion won in mid-April, just over three months later.
Capital inflows have also been strong. So far this month, average daily trading value in the ETF market has reached 28.3031 trillion won, a record high. That is equal to 60% of the KOSPI's average daily trading value. In December last year, the average daily trading value was just 6.5691 trillion won. It then exceeded 10 trillion won for the first time in January, at 14.4099 trillion won, and has continued to rise since then.
As the ETF market grows rapidly, its influence on the stock market is also expanding. Large-scale inflows into ETFs are supporting index gains, and when the index rises, ETF values increase as well, creating a virtuous cycle.
Brokerage analysts expect the market to keep expanding as the shift of money into ETFs accelerates. Kim Jin-young, a researcher at KIWOOM Securities Co., Ltd., said, "Household asset allocation in Korea has begun shifting from deposits and real estate toward financial assets centered on ETFs and pensions." He added, "This year, ETF net assets are likely to surpass 500 trillion won and then attempt to reach 600 trillion won." He also noted, "ETFs account for only 8% of KOSPI market capitalization, which is still far below the levels seen in other advanced markets such as the United States at 20% and Japan at 9%." He concluded, "There is still plenty of room for further expansion."
There are also expectations that the launch of leveraged ETFs tied to individual stocks will further boost inflows. Eight asset managers, including Samsung Asset Management and Mirae Asset Global Investments Co., Ltd., will introduce leveraged and inverse 2X products on the 27th that track twice the daily rise or fall of Samsung Electronics and SK hynix.
Kang Song-cheol, a researcher at Eugene Investment & Securities Co., Ltd., said, "Many of the top overseas stocks held by domestic investors include leveraged and inverse products tied to individual stocks." He added, "Leveraged and inverse products linked to Samsung Electronics and SK hynix are also likely to attract strong investor interest."
jisseo@fnnews.com Seo Min-ji Reporter