ETF Market Nears 500 Trillion Won in Market Cap, Driving KOSPI Higher in a Virtuous Cycle

As the stock market rallies, the Exchange Traded Fund (ETF) market is closing in on the "500 trillion won era." As ETFs exert greater influence on the market, expectations are rising that they will help support KOSPI's move toward the 8,000 level.
According to Korea Exchange (KRX) on the 26th, the combined market capitalization of ETFs stood at 494.4031 trillion won at the close of trading that day. The net asset value, which reflects the actual value of ETFs, is released the following morning, but it is expected to be at a similar level. Market capitalization refers to the number of ETF shares issued multiplied by the market price, while net asset value means the net assets remaining after deducting management fees and liabilities from the assets held by the ETF.
As of the 22nd, total ETF net assets were 484.7717 trillion won. That was up 12.80% in just this 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 surpassed 200 trillion won in June last year. After another seven months, they topped 300 trillion won in early January this year, and then crossed 400 trillion won in mid-April, just over three months later.
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 amounts to 60% of the KOSPI's average daily trading value. In December last year, the daily average was just 6.5691 trillion won. But after it first exceeded 10 trillion won in January, at 14.4099 trillion won, the upward trend has continued.
As the ETF market grows rapidly, its influence on the stock market is also increasing. Large inflows into ETFs are supporting index gains, and when the index rises, ETF values climb as well, creating a virtuous cycle.
Brokerages expect the market to keep expanding steadily as the shift of money into ETFs accelerates. Kim Jin-young, a researcher at KIWOOM Securities, said, "Korean households have begun shifting their asset allocation from deposits and real estate toward financial assets centered on ETFs and pensions." He added, "This year, ETF net assets will likely break through 500 trillion won and then attempt to reach 600 trillion won." He also noted, "ETFs account for only 8% of KOSPI's market capitalization, which is still well below other developed markets such as the United States, at 20%, and Japan, at 9%." He said there is still plenty of room for further growth.
Some also expect inflows to accelerate further with the launch of single-stock leveraged ETFs. Eight asset managers, including Samsung Asset Management and Mirae Asset Global Investments, will introduce leveraged and inverse 2X products on the 27th that track twice the daily rise or fall of Samsung Electronics and SK hynix as single stocks.
Kang Song-cheol, a researcher at Eugene Investment & Securities, said, "Among the top overseas stocks purchased by domestic investors, many are single-stock leveraged and inverse products." He added, "The Samsung Electronics and SK hynix leveraged and inverse products will also draw strong interest from investors."
jisseo@fnnews.com Seo Min-ji Reporter