ETFs Lose 100 Trillion Won in Market Cap... Fall Below 400 Trillion Won

'Black Friday'... KOSPI plunges 6%
ETF market cap, once above 500 trillion won, also collapses
Retail investors net-buy despite plunge in leveraged products
"Index-focused strategies are the best approach"

South Korea's stock market plunged on November 6, sending the combined market capitalization of exchange-traded funds (ETFs), which had topped 500 trillion won at one point this year, down into the 300 trillion won range.

According to the Korea Exchange, the combined market capitalization of the 1,184 ETFs listed in South Korea stood at about 394 trillion won after the market closed on November 6. It was the first time in seven months that ETF market capitalization had fallen below 400 trillion won, since April 14, when it stood at 398 trillion won. The ETFs' net asset value, or assets under management (AUM), which reflects their actual asset value, is also expected to have fallen below 400 trillion won.

The ETF market grew rapidly this year. By net asset value, it successively surpassed 300 trillion won on January 5, 400 trillion won on April 15, and 500 trillion won on May 27. On June 22, ETF market capitalization had climbed to about 534 trillion won, but by November 6, it had fallen 26.2% from that peak.

The sharp declines in single-stock leveraged products also contributed significantly, as semiconductor stocks that had led the market underwent a correction in the second half of the year. On May 27, 16 single-stock leveraged products were newly listed and attracted substantial inflows, pushing total ETF net assets above 500 trillion won. Samsung Electronics single-stock leveraged products, which traded above 30,000 won per share in June, fell about 83% to the 5,000-won range. SK hynix single-stock leveraged products plunged more than 90%, from the 37,000-won range to the 3,000-won range.

Against this backdrop, individual investors have recently poured substantial amounts into leveraged ETFs, raising concerns that their losses could be substantial. According to ETF Check, the product individual investors bought the most over the past month was KODEX Leverage, with purchases totaling 1.2201 trillion won. KODEX KOSDAQ 150 Leverage ranked second with 941.1 billion won, while KODEX Semiconductor Leverage ranked ninth with 257.2 billion won. KODEX SK hynix Single Stock Leverage also ranked 16th, with individual investors buying 114.8 billion won worth. Over the same period, these leveraged products fell by between 45% and 64%.

As South Korea's stock market fell much more sharply than global markets, the rankings of ETFs by size also changed. On June 22, when the ETF market was at its largest, KODEX 200, which tracks the KOSPI 200, ranked first with net assets of 32 trillion won. Three domestic equity ETFs, including KODEX 200, were among the top five. By contrast, on November 6, TIGER US S&P 500 ranked first with 21 trillion won in net assets, and KODEX 200 was the only domestic equity ETF in the top five.

Nam Yong-soo, head of the ETF division at Korea Investment Management, said, "Market volatility has increased due to a combination of factors: the greater possibility of delays or cancellations in data center construction following the U.S. midterm election results; concerns over the gap between AI investment and revenue, which have been building for some time; and demand for cash to prepare for Anthropic's listing."

Nam added, "Sentiment is likely to remain weak until mid-November amid these headwinds. In the current situation, the best course is to refrain from leveraged investing and focus on index-based strategies."

This content was produced with the assistance of AI translation services.