Rapid Growth and Overheating Trends in South Korea's ETF Market
South Korea's Exchange Traded Fund (ETF) market has experienced exponential growth, with total net assets approaching 199.7 trillion won. This represents a doubling in size from two years ago and more than a tripling over the past five years. This growth is largely fueled by the popularity of the diversified investment advantages that ETFs offer investors. However, with rapid expansion come certain challenges.
The current market is seeing an oversaturation of similar products, known as the 'fish bread ETF phenomenon', and an increase in 'zombie ETFs' with no real financial gain. Asset management firms are fiercely competing to lower fees, resulting in intense market competition. The Financial Supervisory Service is now investigating this market overheating. While the competitive dynamics can lead to variety and innovation, they also carry the risk of excessive competition.
This year, the local stock market's strength has also boosted interest in ETFs, with high-dividend, nuclear energy-themed, and semiconductor-related ETFs being particularly popular. Notably, ETFs associated with AI platform company Palantir have also gained attention. In retirement pension markets, there is a growing trend towards ETF investment, suggesting a shift in long-term investment strategies.
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South Korean ETF Market Nears 200 Trillion Era… Need for Qualitative Growth - ETodayAs of the end of May, net assets are at 199.7 trillion, doubling in 2 years, and growing more than threefold in 5 years. The fascination with 'diversified investment' leads to overheated competition and a challenge for product differentiation in Seoul's Yeouido securities district. (EToday DB)