Index Fund Trading Up 51 Percent
By Park Hyong-ki
Staff Reporter
The trading of exchange-traded funds (ETFs) tracking and investing in a pool of liquid stocks grew in the first quarter of the year as the index fund continues to serve investors as a hedging tool through investment diversification.
According to the Korea Exchange (KRX), the daily trading volume of ETFs hit an outstanding 3.5 million shares, up 51 percent from the end of last year. Its transactions increased 52 percent to 81 billion won per day.
The turnover ratio of ETFs stood at 894 percent.
The exchange attributes the rise to active trading by foreign investors and mutual funds.
Mutual funds investing in ETFs have been the biggest daily trades so far, with volume reaching 32.3 billion won, accounting for 40 percent of the total, while foreign ETFs trading stood at 30.1 billion won daily, accounting for 37 percent. Retail investments followed with 9.3 billion won.
Although daily trading increased in the first three months, the market value of ETFs shrank as subprime woes weighed down stock prices.
Net value of the ETFs market stood at 1.8 trillion won, down 28 percent.
``As foreign investors have been among the largest traders, they massively sold off shares on index funds to secure liquidity to counter the U.S. sub-prime crisis,'' said the exchange.
As the benchmark KOSPI fell 10.2 percent on average in the first quarter, foreign ETFs holdings decreased by 72 percent to 215.7 billion won, accounting for 12 percent of the market.
An index fund tracking and investing in IT and semiconductor stocks outperformed other types, as it recorded returns of 6-8 percent on average since the beginning of the year. ETFs tracking bank and media shares performed poorly. Of 21 ETF products in total, 12 were in the red.
However, Korea still boasts of being highly attractive for ETFs trading globally along with the United States, Europe and Hong Kong.
The country's ETFs market grew 55 percent last year, the second highest increase after Singapore.
phk@koreatimes.co.kr