KRX aims to make South Korea’s ETF market global

South Korea’s exchange-traded fund market has witnessed a major change this month with the number of funds available on the market surpassing 500 for the first time, marking a quantum leap from its beginning 19 years ago when it had only four products.

Following an increase in the number of products available, the daily turnover of the country’s ETFs has surged to become the third-largest in the world, according to the Korea Exchange.

The bourse operator aims to make the locally listed ETFs become the representative investment products in annuity markets. To do so, it plans to give approvals to various actively managed equity ETFs to add more vitality to the market.

“Running in tandem with the sustainable growth of ETF market, Korea Exchange will provide various investment options to investors by continuously supplying products that can meet their demands. ... We’ll not only focus on the market’s next level of growth, but also vow to put effort into investor protection,” said an official from KRX.

Representing a basket of stocks that reflects an index or commodities and bonds, an ETF can be traded on stock exchanges. The very feature allows more flexibility in making investments and provides both retail investors and institutions with a more liquid and risk-hedging tool.

The average daily trading volume from the beginning of this year to Aug. 6 stood at 3.17 trillion won ($2.72 billion), surging 97 times from 32.7 billion won logged in 2002. Korea was followed by the US and China, the data showed.

The combined net assets of domestic ETF market also surged to 61.86 trillion won as of end-June this year, making Korea the 11th- biggest market in terms of assets value. Compared with 2002, their net value jumped by 180 times.

KRX attributed the market’s rapid growth to diversified ETF goods rolled out by local asset management firms. By taking advantage of the low cost and high transparency of the products, the ETF market was able to contribute to the Korean capital market’s quantitative growth and qualitative improvement, the bourse officials said.

By Jie Ye-eun (yeeun@heraldcorp.com)