[Herald Interview] Why Korean investors can benefit from US equity exposure

Hamish Preston, head of US Equity Indices at S&P Dow Jones Indices (S&P Dow Jones Indices)

With the US stock market representing more than half of the world’s total equity market capitalization, adopting a US perspective for investment decisions can be helpful for Korean investors, Hamish Preston, head of US Equity Indices at S&P Dow Jones Indices, said in a recent interview held online with The Korea Herald.

Over the years, Korean investors have been showing an increased appetite in US-listed stocks. Their holdings of US equity stood at $88.23 billion in end-July, displaying a sharp growth from $68.23 billion in end-2023, data from the Korea Securities Depository showed.

Attesting the high interest, 31 ETF products tied to the S&P indices are listed on the Korean market, the index operator’s webpage shows. The ETF products are linked to various indices that track the performance of 500 leading companies on the market such as the S&P 500, and to those tied to selective industries from energy to tech.

“What is important to remember is that US equities have relevance to investors around the world,” Preston said, when asked why the indices offered by S&P appeal to Korean investors.

The US equity market is the largest in the world, with US-domiciled companies representing 60 percent of the index market capitalization of the S&P Global BMI, the index operator’s global equity barometer.

“What this means is that when people are thinking about understanding what is going on in the world, having a US perspective can be helpful,” he said.

The S&P 500 Equal Weight Index, which assigns the same weight to all its underlying stocks, can be an option in times of high volatility, Preston said.

In July, Mirae Asset Global Investments introduced the Tiger US S&P 500 Equal Weight ETF, becoming the first Korean asset manager to introduce an equal-weight ETF tied to the index.

“For people looking to retain large-cap US equity exposure but perhaps mitigate their exposure to those larger names, equal-weight has been relevant,” he said.

When asked how the Korea Exchange, the country’s sole bourse operator, could make its offered indices, such as the Kospi and Kosdaq, more appealing to foreign investors, Preston highlighted the importance of an index objective and maintaining it through rebalancing.

“From an index perspective, the rules-based transparent approach is key. That is why every S&P index we calculate is governed by a publicly available methodology document,” Preston said.

By Im Eun-byel(silverstar@heraldcorp.com)