Investment in inverse funds betting on Kospi fall adds nearly $2 bn this month

Investment in inverse funds leveraging on a fall in South Korea’s stocks has added nearly $2 billion over the last two weeks amid anticipation of a correction in the main Kospi that has been on an almost uninterrupted upward spiral since March.

As of Jan. 14, inverse exchange-traded funds (inverse ETF) designed to profit from a decline in the value of an underlying benchmark pulled in 2.2 trillion won ($2 billion) since the beginning of this year. Just until a week earlier, only 32.2 billion won had been placed in the funds.

The sharp turnaround began on Jan. 7 when the Kospi broke the 3,000-mark for the first time.

Inverse ETFs made the country’s top 2 in the list of funds with the largest inflow of investors’ money, as of Jan. 14. Samsung KODEX 200 Futures Inverse 2X ETF has attracted 1.3 trillion won and Samsung KODEX Inverse ETF 656 billion won, according to local fund rating agency FnGuide, suggesting that investors are betting more on the Kospi’s decline than further rise.

The electric vehicle and its related sectors, however, remained as hot stocks among investors. They made half of the top 10 EFTs, based on net inflow of funds in the first two weeks for this year.

Mirae Asset TIGER KRX Secondary Battery K-New Deal ETF ranked third after attracting 150.4 billion won over the two-week period, and Samsung KODEX Secondary Battery Industry ETF the fourth largest 134 billion won.

Other top-ranked ETFs also invest in EV batteries or others in the EV value chain.

“Many investors invested directly in EV and rechargeable battery stocks last year but they have moved money to the ETFs, hoping to diversify investment options amid increasing volatility,” said a Korea Investment Management analyst.

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