Increased Risk in Commodity ETP Investments Amidst Global Conflicts and Tariff Uncertainty
Recent global conflicts and tariff uncertainty originating from the US have significantly increased the volatility in the commodity markets. In response, financial authorities have issued warnings regarding investments in commodity exchange-traded products (ETPs). Of particular concern are leveraged and inverse ETPs, which could pose high risks in the short term due to sudden fluctuations in the underlying assets, potentially leading to reduced cumulative returns. Authorities emphasize the importance of monitoring the volatility and the possibility of increased premium spreads, thereby advising caution.
Following the government’s tax reform announcement, individual and institutional investors have adjusted their investment strategies. Initially opting for leveraged ETFs, investors soon shifted towards inverse products. This shift was triggered by the Kospi’s short-term decline and disappointment in the tax reform, prompting experts to lower their forecasts for the Kospi. Additionally, a decline in foreign investor buying sentiment has been noted.
The Financial Supervisory Service has expressed concerns regarding the increased volatility in the commodity markets, stemming from the Israel-Iran conflict and US tariff uncertainties. If this volatility persists, speculative capital inflows and outflows in commodity ETPs, particularly in the energy sector, might intensify. The regulatory body plans to continuously monitor the situation and is prepared to implement further measures if necessary.
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