77.9 Trillion Won Vanishes in a Month as ETF Market Plunges 80%

[Financial News] Nearly eight out of 10 exchange-traded funds listed in South Korea fell last month, sending the overall ETF market sharply lower. A steep drop in semiconductor stocks, foreign net selling, and tighter rules on leveraged products all weighed on net assets and trading value.
According to the Korea Exchange and ETF Check on the 6th, 891 of the domestically listed ETFs fell last month, accounting for 78.3% of the total. Another 244 ETFs rose. A total of 531 funds dropped more than 10% over the month, accounting for more than half of all declining products.
The share of declining products was similar to March, when war broke out in the Middle East. At that time, 838 ETFs fell, or 78.5% of the total.
Total net assets in the ETF market also fell sharply. At the end of last month, net assets stood at 434.4 trillion won, down 77.9 trillion won from 512.4 trillion won at the end of the previous month. On July 30, the figure briefly fell to 398 trillion won, slipping below the 400 trillion won mark.
The weak performance of the ETF market is linked to the sharp decline in the KOSPI and KOSDAQ Index. The KOSPI fell 22.19% in a month, dropping from 8,476.48 on June 30 to 6,595.45 on July 31. Over the same period, the KOSDAQ Index also slid 21.44%, from 916.18 to 719.76.
Weakness in semiconductor stocks was cited as a major factor behind the index declines. Concerns over China's semiconductor rise grew after the successful listing of ChangXin Memory Technologies (CXMT), while U.S. semiconductor stocks such as NVIDIA, AMD, and Micron tumbled first on Wall Street.
Samsung Electronics and SK hynix, which account for a large share of market capitalization in the domestic stock market, also posted double-digit losses. Last month, Samsung Electronics fell 21.41% and SK hynix dropped 35.17%, adding to the pressure on the indices.
Foreign investors' selling also added pressure to the ETF market. They posted net sales of 17.9 trillion won in the Korea Exchange Main Board and the KOSDAQ market last month. On July 28, when the KOSPI fell 10.84%, foreigners sold a net 496.64 billion won only on the Korea Exchange Main Board.
ETF trading volume has also declined recently. On the 5th, total ETF trading value came to about 15.9 trillion won, roughly half of the July daily average of about 33 trillion won.
Stricter rules targeting single-stock leveraged products were also cited as a factor behind the drop in trading value. Trading value for 16 products, including single-stock leveraged ETFs and inverse funds, came to 919.8 billion won on the 5th. It was the first time since their listing that trading value for these products fell below 1 trillion won, coming just four trading days after the financial authorities raised the initial deposit requirement from 10 million won to 30 million won starting July 31.
Just before the rules took effect, on July 30, trading value for these products stood at 12.4485 trillion won. It fell to 3.1518 trillion won on the first day of enforcement, July 31, and then declined further to around 1 trillion won. Their share of total ETF trading value also dropped from 30% to 40% before the rules to around 5% recently.
[email protected] Han Seung-gon Reporter