The domestic exchange-traded fund (ETF) market, which once exceeded 500 trillion won, has fallen below 400 trillion won in just four months. This decline is attributed to significant drops in both the domestic and U.S. stock markets, leading to a rapid decrease in ETF asset values.
According to the Korea Exchange, as of the market close on November 6, the market capitalization of 1,184 domestic ETFs was recorded at 393.5682 trillion won. While the total net assets will be announced on November 9, it is estimated to be around 395 trillion won, considering the close alignment with market capitalization.
This marks the first time since April 14, when net assets were at 398.1367 trillion won, that the total has fallen below 400 trillion won. Compared to the all-time high of 532.9746 trillion won on June 22, this represents a decrease of approximately 138 trillion won in just over four months.
The domestic ETF market had maintained its value above 400 trillion won even as the KOSPI index dropped from over 9,000 to the mid-5,000s. The significant proportion of ETFs based on U.S. stocks helped cushion the market against declines, as the U.S. stock market remained relatively strong.
However, recent simultaneous declines in both domestic and international stock markets have caused the 400 trillion won threshold to be breached. The KOSPI fell more than 10% from November 3 to 6, while the U.S. S&P 500 and Nasdaq indices dropped by 3.44% and 5.52%, respectively, on November 5. The Nasdaq's one-day decline was the largest in nearly 19 months.
Despite continued inflows from individual investors, the overall value of ETF assets has decreased. Individuals have net purchased a total of 82.3726 trillion won in ETFs as of November 6 this year. Even after net purchases of 50.0441 trillion won since the net assets first surpassed 400 trillion won on April 15, the total market size has fallen back below that threshold.
Notably, domestic equity ETFs have seen significant declines. The market capitalization of KODEX 200, which had net assets of 32 trillion won in June, dropped to 19.5 trillion won as of November 6. In contrast, the market capitalization of TIGER U.S. S&P 500, which was around 19.8 trillion won during the same period, has exceeded 20 trillion won.
The sharp decline in the ETF market size has raised concerns about potential valuation losses for long-term funds, such as retirement pensions. As of the end of last year, approximately 50 trillion won of the roughly 500 trillion won in retirement pensions was invested in ETFs, with significant additional inflows estimated this year.
Experts suggest that if market volatility continues, it may take time for the ETF market to recover its size. The simultaneous downturn in domestic and international stock markets has made it difficult for new capital inflows to offset the decline in net assets due to falling underlying asset prices.
* This article has been translated by AI.
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