Booming Semiconductor ETFs and Market Trends in Korea
Recent developments in Google's TPU have spotlighted semiconductor-themed ETFs, driving a strong performance in this sector. The 'KODEX AI Semiconductor Equipment' ETF rose by 13%, underscoring a positive outlook on the AI and semiconductor industries. Moreover, ETFs focusing on small and mid-cap stocks are outperforming large caps, particularly in semiconductor materials, parts, and equipment, demonstrating high yields.
Conversely, the shipbuilding and defense sectors are experiencing weakened investment sentiment, with defense industry-related ETFs showing declines. Consequently, investors are notably shifting their focus towards semiconductor and AI-oriented ETFs.
Furthermore, the rise in commodity prices has buoyed the 'HANARO Global Gold Mining Companies' ETF to an 11.18% gain. Individual investors have also shown increased interest in major US index ETFs, highlighting their active participation in overseas equity markets.
ETF Market Adjustment and Tax Benefit Considerations
With the bullish trends in domestic and international stock markets this year, there is a growing necessity to adjust the nominal value of Exchange Traded Funds (ETFs). High-priced ETFs may restrict access for small investors, while there are concerns that inverse ETFs might become penny stocks, leading to optical illusions and speculation. Unlike the United States, where such adjustments efficiently manage price ranges, South Korea's current legal framework does not permit ETF split and merge actions. In response, lawmaker Kim Hyun-jung is promoting legal reforms to allow face value adjustments for ETFs and ETNs.
Additionally, foreign exchange authorities are considering tax benefits for currency-hedged overseas ETFs, potentially encouraging increased foreign investment. At present, dividends and capital gains on these ETFs face a tax rate of 15.4%, escalating up to 49.5% if financial income exceeds a certain threshold. Authorities are also evaluating the possibility of permitting netting of gains and losses to streamline tax burdens.
Mirae Asset's 'TIGER CD1-Year Rate Active ETF' Sees Increased Liquidity and Investment Appeal
Mirae Asset Management's 'TIGER CD1-Year Rate Active (Synthetic) ETF' has reached 1.5309 trillion won in net assets, reflecting the recent rise in 1-year Certificate of Deposit (CD) rates. This ETF, which is the first in Korea to track 1-year CD rates, allows investors to gain returns even with short-term investments and has garnered significant attention. Notably, it saw an influx of more than 5 trillion won within this year alone, indicating strong interest amid rising market rates.
The key attraction of this ETF lies in the current 2.93% CD rate, providing investors with a relatively safe means to deploy their funds in the rising rate environment. Its low total expense ratio (TER) of 0.0098% significantly reduces investment costs, and the annual dividend payments mitigate the impact of capital loss and tax burdens, enhancing its appeal.
The recent spike in the 1-year CD rate is seen as a normalization of an unusual interest rate inversion and has established the ETF as one of the most liquid options in the market. It provides a viable option for managing short-term idle funds and is considered a more efficient investment choice compared to traditional bond ETFs in terms of liquidity and returns. Mirae Asset aims to offer investors a stable pursuit of interest returns and agile market responsiveness through this ETF.
Leverage ETFs and Semiconductor Stock Market Dynamics
The recent surge of the Korean stock market, surpassing the 4,000-point threshold, is largely attributed to the bullish semiconductor sector. Notably, the sharp rise in shares of Samsung Electronics and SK Hynix has driven more than $400 million in global investment into the 'Samsung Electronics 2x Leverage ETF' and 'SK Hynix 2x Leverage ETF' listed on the Hong Kong Stock Exchange. Of this, a significant portion, amounting to 40 billion KRW, represents investments by Korean investors, highlighting keen interest in these ETFs.
Domestically, while single stock leverage ETFs are restricted by regulation, investors are navigating these limitations by purchasing through foreign markets. As U.S. capital shifts towards Asian tech, Samsung Electronics and SK Hynix are emerging as key players in the stock market, which is positively impacting their stock prices.
Additionally, this week saw notable movements within the domestic ETF market, with Samsung Asset Management's 'KODEX AI Semiconductor Core Equipment' exhibiting an impressive weekly gain of 13.10%. This non-leverage product ranks highest in performance, attracting significant investor interest. Furthermore, leverage ETFs related to semiconductors, such as Mirae Asset Management's 'TIGER US Philadelphia Semiconductor Leverage (Synthetic)' and Samsung Asset Management's 'KODEX Semiconductor Leverage', continue to record exceptional returns, garnering attention.
This week further witnessed the introduction of six new ETFs by major local asset managers, including KB Asset Management and Samsung Asset Management. These new listings offer a broader array of options for investors, and their future performance is anticipated with interest.
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