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Korea’s ETF trade surges on short-term investors: data
By Korea HeraldPublished : Jan. 10, 2012 - 16:09
Korea’s exchange-trade funds market has emerged as the biggest in Asia in terms of trading value, data showed Tuesday.
The sharp rise of ETF trades in Korea demonstrates that investors put more of their short-term funds in the investments amid a positive outlook for the overall ETF market this year.
ETF is an investment fund traded on stock exchanges with attractive features such as low cost, tax efficiency and stock-like characteristics.
According to the Korea Exchange, the country’s average daily trading value of ETF reached $711 million, marking the highest level in Asia.
On the global market, Korea ranked fourth after the U.S. ($34.5 billion), Germany ($1.2 billion) and Britain ($1.1 billion).
Trailing behind Korea in ETF trading value were Canada ($366 million), Mexico ($347 million) and Switzerland ($330 million).
In Asia, Korea outpaces its neighbors including China ($320 million), Hong Kong ($223 million) and Japan ($190 million) by a wide margin.
The sharp rise in ETF trading value is largely attributed to individual investors who sought short-term investment gains through leveraged funds. The proportion of individual investors in the total ETF trade value climbed to 51.2 percent last year, up from 38.5 percent in 2010 and 19.2 percent in 2009.
Local investors tend to opt for leveraged ETF ― speculative trades with higher risks and a bigger turnover ratio which could backfire seriously if their betting gets out of control.
ETFs cost less than other investment funds, allowing investors to get away with short-term gains when their prediction for the direction of the market turns out to be correct.
Despite the volatility factor, Korea’s financial regulators are keen to nurture the ETF market by allowing pension and retirement funds to put their money in this investment vehicle in the long term.
By Yang Sung-jin (insight@heraldcorp.com)
The sharp rise of ETF trades in Korea demonstrates that investors put more of their short-term funds in the investments amid a positive outlook for the overall ETF market this year.
ETF is an investment fund traded on stock exchanges with attractive features such as low cost, tax efficiency and stock-like characteristics.
According to the Korea Exchange, the country’s average daily trading value of ETF reached $711 million, marking the highest level in Asia.
On the global market, Korea ranked fourth after the U.S. ($34.5 billion), Germany ($1.2 billion) and Britain ($1.1 billion).
Trailing behind Korea in ETF trading value were Canada ($366 million), Mexico ($347 million) and Switzerland ($330 million).
In Asia, Korea outpaces its neighbors including China ($320 million), Hong Kong ($223 million) and Japan ($190 million) by a wide margin.
The sharp rise in ETF trading value is largely attributed to individual investors who sought short-term investment gains through leveraged funds. The proportion of individual investors in the total ETF trade value climbed to 51.2 percent last year, up from 38.5 percent in 2010 and 19.2 percent in 2009.
Local investors tend to opt for leveraged ETF ― speculative trades with higher risks and a bigger turnover ratio which could backfire seriously if their betting gets out of control.
ETFs cost less than other investment funds, allowing investors to get away with short-term gains when their prediction for the direction of the market turns out to be correct.
Despite the volatility factor, Korea’s financial regulators are keen to nurture the ETF market by allowing pension and retirement funds to put their money in this investment vehicle in the long term.
By Yang Sung-jin (insight@heraldcorp.com)
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Articles by Korea Herald
