Volatility in Stock and Bond Markets and ETF Trends
The recent breakthrough of the KOSPI index past the 4000 mark has garnered significant attention in the stock market. Consequently, the bond market is experiencing challenges, as expectations for an interest rate cut by the Bank of Korea have diminished, leading to a decline in bond prices. Long-term government bond products have been particularly hard-hit, with some ETFs witnessing declines of over 9% in the past three months.
Amidst this, treasury bond yields have reached annual highs, pushing related ETF prices downward. The TIGER Treasury Bond 30-Year STRIP Active ETF recorded a -10.45% return, as the likelihood of an interest rate cut remains low due to the upcoming increase in treasury issuance and the current economic conditions. This suggests that the bearish trend for ETFs might persist.
Conversely, individual investors have favored ETFs over individual stocks in the KOSPI market this year. They have divested over 21 trillion won in individual stocks while making substantial purchases of domestic and international index-tracking ETFs. This shift can be interpreted as investors seeking diversification through ETFs as asset prices remain elevated. Market participation by figures like President Lee Jae-myung and the financial oversight authority's President Lee Chan-won has further encouraged the expansion of ETF involvement.
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