As international conflicts, including the U.S.-China trade war, lead to increased price volatility in commodities, the Financial Supervisory Service (FSS) has urged caution regarding investments in commodity exchange-traded products (ETPs).
According to the FSS on September 22, the market capitalization of commodity ETPs reached 12.4 trillion won as of September 11, marking a 1.9% increase (230 billion won) from the end of last year. This represents 2.6% of the total ETP market capitalization of 469 trillion won.
Notably, the market capitalization of oil ETPs has seen significant growth. As of September 11, the market capitalization of oil ETPs stood at 2.68 trillion won, accounting for 21.6% of the total commodity ETP market. This figure reflects a 46.7% increase (850 billion won) compared to the end of last year, when it was 1.83 trillion won.
In contrast, during the same period, the market capitalizations of silver ETPs, natural gas ETPs, and gold ETPs decreased by 18.2%, 20.3%, and 0.6%, respectively.
The proportion of leverage and inverse products among commodity ETPs is 37.4%, which is 7.4% of the total ETPs, raising concerns about risk. Leverage and inverse products are more volatile than standard products and are susceptible to short-term speculative investments.
This can lead to a negative compounding effect, where cumulative returns may fall below the underlying asset's performance, even if the asset's price simply fluctuates up and down. The FSS analysis indicates that leverage and inverse products account for 88.4% and 93.6% of oil and natural gas ETPs, respectively.
The FSS stated, "Commodity prices are influenced by various factors, including international conflicts, changes in oil production, industrial demand driven by AI, climate change, and exchange rates, making it difficult for individual investors to predict price volatility. Especially in a situation where geopolitical risks are not fully resolved, the potential for increased volatility is significant."
The FSS explained that if the price of an exchange-traded note (ETN) falls below 1,000 won due to sharp fluctuations in commodity prices, it could be delisted. ETNs issued since 2021 have a clause for early liquidation if their price drops below 1,000 won, leading to automatic delisting. ETNs issued before 2021 may also face delisting if their price falls below 100 won, making it impossible to manage the deviation rate.
The FSS added, "We will continue to monitor unusual signs regarding the trading volume and deviation rates of commodity ETPs, especially leverage and inverse products. If the risks to investors increase due to rising commodity price instability and deepening geopolitical risks, we will take proactive measures, including issuing consumer alerts."
* This article has been translated by AI.
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