Local Equity Funds Post W100 Billion Inflow Daily
By Yoon Ja-young
Staff Reporter
Equity funds investing on the Seoul bourse posted an inflow of 100 billion won a day on average this year, Samsung Securities said.
``The money put in funds investing in the local stock market grew to 65 trillion won from 40 trillion won at the beginning of the year. It means there was an influx of 100 billion won daily on average,'' said Lee Yu-na, an analyst at Samsung Securities.
Lee said fund investors are adopting smart investment strategies. They withdrew money from funds when the stock market index reached a high, followed by massive buying once the index plunged.
Funds investing in Korean equities recorded a 35 percent return on average this year despite the fluctuating global stock market. It contrasts with the mere 1.6 percent return last year, though it is lower than the 52.4 percent gain in 2005.
Funds in the top tier recorded a nearly 60 percent return, much higher than the 32.2 percent rise of the main KOSPI index. ``Most of the funds in the top 20 are active funds that aggressively pursue higher investment returns,'' Lee said.
The paradigm shift in asset management, from bank savings to diverse investment tools, made equity funds the hottest investment item this year. Strong emerging markets such as China and India, coupled with the government's measures to promote investment overseas, pushed investors into overseas equity funds. The government exempted capital gains tax on earnings from funds investing in stock markets overseas from June, to induce an outflow of liquidity. Exporters have complained about the glut of dollars as its weakening value marred their competitiveness in prices.
``Overseas equity funds grew to 43 trillion won, from a mere 6 trillion won in January this year,'' Lee said. The influx stagnated in July and August with the U.S. subprime mortgage problem, but the strong drive of the Chinese stock market in September lured many investors to China funds, according to Samsung Securities. Liquidity seems to be heading to the local stock market again after recent corrections on the Chinese bourse, it added.
Asset management companies recommend Russia and Eastern Europe, China and India, and Latin America as promising emerging markets for next year. However, they say expectations shouldn't be too high as risk factors such as the subprime issue still linger.