The South Korean bourse operator said Tuesday that it will expand the local exchange traded funds and exchange traded notes markets in a bid to attract rising demand for overseas direct investment by locals.

The Korea Exchange said it will introduce various types of ETFs and ETNs to the local stock market, with those tracking overseas potential industrial sectors, foreign currencies and Treasurys, such as Chinese yuan and Japanese yen.

It will also bring foreign big-name ETFs tracking precious metals and commodities to the South Korean bourse to catch the eyes of local investors who buy those instruments through overseas direct purchase.

"South Korea's ETF and ENT markets have played a key role in attracting demand for foreign direct investments and global asset management," said the KRX in a release. "We will make efforts to make the local markets become an Asian hub."

There will be tax incentives for some ETFs that track foreign stock market indices, starting from next year, it added.

There are 55 ETFs and 16 ETNs floating on the local bourse that track overseas market indices as of last week.

Against the backdrop, the KRX will join hands with its Taiwanese counterpart in cross-listing their own ETFs and cooperate with Asian rivals to develop an index that covers South Korea, Hong Kong, Taiwan, China, Japan and India.

An ETF refers to an investment fund traded on stock exchanges and represents a basket of stocks that reflects an index, which provides retail investors and institutions with a more liquid and risk-hedging tool, while ETN is a type of debt security whose returns are based on the performance of various market benchmarks.

Similar to bonds and exchange traded funds, ETFs and ETNs are traded on the main exchange during normal trading hours.

They are hailed as a safer and higher return investment destination with risk-hedging tools at a time of low interest.

The daily turnover of ETFs and ETNs that track foreign indices doubled to 67.5 billion won ($59.7 million) as of Oct. 23, up from 32.2 billion won tallied on Jan. 1, according to the KRX.

The total asset value soared 88.4 percent to reach 1.9 trillion won over the cited period. (Yonhap)