ETFs in U.S. chips, Korean batteries post highest returns in first half

Exchange-traded funds (ETFs) linked to U.S. semiconductor and Korean battery stocks experienced a surge in Korean stock markets in the first half of this year, with returns nearing 100 percent, on the back of strong performance of those stocks. During the same period, also the largest number of ETFs were listed on the markets.

According to the Korea Exchange on Tuesday, the Mirae Asset TIGER Synth-US PHLX Semiconductor Sector Leverage ETF, a double leverage ETF mirrors the Philadelphia Semiconductor Index, posted the highest return among all ETFs listed on Korean markets, seeing a 95.4 percent gain since the beginning of the year through to Monday. The rally in both domestic and global markets has led to the strong performance of leveraged ETFs. The Mirae Asset TIGER Synth-Nasdaq 100 Leverage ETF, which provides double exposure to the NASDAQ 100 Index, delivered a return of approximately 92 percent over the same period. The NH-Amundi HANARO Kosdaq 150 Futures Leverage ETF, a double leverage ETF that mirrors the Kosdaq 150 index, achieved an 88 percent gain.

“As the Kosdaq rose to one of the highest levels globally in the first half of the year, an increase has been witnessed in related investments,” said Lim Tae-hyeok, head of ETF operations at Samsung Asset Management Co. “Investors preferred stable yield-seeking products such as bonds with maturities, as well as ETFs that pay regular dividends in an accumulative manner.”

Aside from double leverage products, ETFs that returned over 60 percent in the first half included the Tiger Secondary Battery ETF, the Samsung KODEX FANG Plus ETF H, the KIM ACE Solactive Global Semiconductor TOP4 ETF, and the KB KBSTAR Battery Recycling ETF.

On the other hand, individual investors mostly purchased inverse ETFs, expecting of a decline in the domestic markets. In the first half of the year, individuals bought a net 453.8 billion won ($350 million) of the Samsung KODEX Kosdaq150 Inverse ETF, which inversely tracks the Kosdaq 150 Index. This amount is higher than investments in blue-chip stocks such as Naver Corp., which attracted 42.6 billion won, and Samsung Biologics Co., which attracted 316.1 billion won, from those investors, respectively.

However, due to the uptrend in the Kospi during the period, the ETF posted a negative 29 percent return. The Samsung KODEX 200 Futures Inverse 2X ETF, which tracks the Kospi 200 with inverse double exposures, was also popular among individuals, with about 450 billion won invested in the ETF, but it also dropped 28 percent. In contrast, foreign investors bought over 1 trillion won worth of the TIGER MSCI Korea TR ETF, which focuses on domestic mid- and large-cap stocks.

Another noteworthy trend was the increasing popularity of accumulative investments that provide a steady dividend income. The SOL U.S. Dividend Dow Jones ETF, which provides monthly dividend, ranked third in net purchases by individuals in the first half of the year.

During the first half of this year, a total of 67 ETFs were listed on the securities markets, the highest ever for a half-year term, breaking the record of 59 new ETFs in the first half of 2022. This year‘s new ETFs focused on megatrends with high long-term growth potential, including industries such as defense, artificial intelligence, and genetic technology.

The Korean ETF market is on the brink of surpassing the 100 trillion won mark, with net assets increasing by 20 trillion won since the beginning of the year. Currently, ETF assets account for approximately 5 percent of the Kospi market capitalization. The average daily trading value of ETFs reached 2.75 trillion won as of the end-May, constituting up to 30 percent of the average daily trading value of the Kospi.