By Kim Jae-won
The Korea Exchange (KRX) said Friday that the nation’s exchange traded fund (ETF) market has been growing fast thanks to its efforts to improve the bourse’s infrastructure and trading system.
According to the state-run stock market operator, Korea, together with Japan, ranked top in terms of the number of ETFs in December. Their number in the local market reached 106 in December, up 44 from a year ago.
In terms of ETF assets under management, the KRX ranked fourth with $8.5 billion in 2011, up 64 percent from a year earlier. It has risen 30 places in a decade since its launch in 2002. ETFs are investment funds traded on stock exchanges, much like shares.
Japan was first with $35.4 billion in net assets followed by Hong Kong and China which drew $23.1 billion and $11.7 billion to their markets, respectively. Australia came fifth attracting $4.2 billion, according to data from Deutsche Bank.
The KRX said that it is largely thanks to a drastic increase in derivatives-type ETF trade. Derivatives-style ETFs were traded at 367.6 billion won per day last year accounting for 75 percent of all ETF trade.
Experts say that the booming market is party thanks to the KRX’s advanced infrastructure.
“Korean ETF market has excellent infrastructure. Its transaction system is better than other countries and the government’s regulations are also market-friendly,” said Bae Jae-kyu, a director from Samsung Asset Management.
Bae expects that Korea will grow as a central Asian ETF market, soon edging past Hong Kong.
He, however, showed concerns over the government’s move to impose tax on derivatives trade expecting it will be an obstacle for the market’s further development.
Another executive from a foreign securities company also said that the new tax will cool off derivatives heat in the nation and will eventually reduce tax revenue by lowering other trade too.
“I don’t understand the government’s intention to impose tax on derivative trades. It will definitely work negatively for the Korean market,” said the executive on condition of anonymity.