ETF Market Shows Growth and Shifts Amidst Middle East Risks and Volatility
Last year, domestic asset management companies posted record net profits, mainly driven by increased investment in Exchange Traded Funds (ETFs), with total assets under management expanding by 17% year-on-year. The Financial Supervisory Service is closely monitoring fund flows due to ongoing geopolitical uncertainties, particularly stemming from Middle Eastern conflicts.
Recently, heightened tensions in the Middle East and the impact of the Iran conflict have led to significant increases in oil prices, boosting the performance of oil-related and precious metals ETFs such as those tracking gold and silver. In contrast, growth-oriented thematic ETFs, including those focused on cloud and quantum computing, experienced declines due to profit-taking. There were also notable differences in industry-group ETF performance, with defense and energy-tilted ETFs recording relatively milder losses compared to export-driven large-cap group ETFs.
Meanwhile, increased market volatility has prompted some individual investors to shift from ETFs to individual stocks. As of March, net purchases of ETFs by retail investors declined, whereas net buying of individual stocks reached new highs. Experts continue to stress the importance of diversification given persistent geopolitical risks.
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