Money flows into safer ETFs amid China risk, interest burden

The Korea Times

The Korea Times

Finance

Mon, December 4, 2023 | 03:32

Markets

Money flows into safer ETFs amid China risk, interest burden

Posted : 2023-08-25 08:31

Updated : 2023-08-26 14:11

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By Lee Min-hyung

Money is flowing into safer exchange-traded funds (ETF), as investors move to reduce risks given global financial uncertainties sparked by China's real estate crash and persistently rising market interest rates.

According to data from the Korea Exchange, three TIGER ETFs tracking interest rates ― operated by Mirae Asset Global Investments ― hit a combined asset value of 7.14 trillion won ($5.4 billion) as of closing on Aug. 21.

This is a ten-fold increase from the end of June when the figure reached a mere 560 billion won. The ETF products track certificate of deposit (CD) rates, the Korea Overnight Financing Repo (KOFR) rate and the Secured Overnight Financing Rate (SOFR) from the U.S. These interest-tracking ETFs are classified as safe assets.

"The interest-tracking ETFs are effective investment tools that can hedge risks against prolonged high-interest rates," an official from the asset management firm said. "If investors trade the ETFs via their pension accounts, they can also enjoy tax benefits."

The company expected relevant ETFs to continue gaining the spotlight from investors until the global monetary uncertainty comes to an end at a time when the U.S. Fed continues to signal for additional rate hikes.

Among the three red-hot ETFs from Mirae Asset, the TIGER CD rate-tracking ETF was ranked the nation's second-largest listed ETF in terms of net asset value. The figure came in at 5.45 trillion won, slightly falling behind the unwavering leader KODEX 200 by around 150 billion won.

mhlee@koreatimes.co.kr

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