Retail investors have net purchased about 70 trillion won worth of exchange-traded funds (ETFs) so far this year. The figure exceeds 60 percent of individuals' net purchases of KOSPI stocks, and the ETF buying trend has continued even amid the recent market correction. To respond to sharply expanded market volatility, retail investors have concentrated their purchases on high-stability ETFs since the middle of this year.
According to the Korea Exchange and other sources on the 26th, individuals net purchased about 69.5 trillion won worth of ETFs between January 1 and July 24. That amounts to 63.2 percent of individuals' net purchases of KOSPI stocks, which totaled 109.9 trillion won over the same period. In other words, for every 10 million won of KOSPI stocks retail investors net bought, they net bought 6.3 million won worth of ETFs.
Retail investors net purchased 33 trillion won worth of products in the ETF market in the first quarter of this year. In the second quarter, they net purchased 28.9 trillion won worth of products, and this month they have continued a net buying trend of more than 1 trillion won. While ETF net assets fell from 533 trillion won on the 22nd of last month to 459 trillion won on the 23rd of this month, retail buying has strengthened.
Between the 14th and 23rd of this month, individuals net sold 7.6 trillion won worth in the KOSPI market but net purchased 180 billion won worth of products in the ETF market. This is interpreted as investors selling individual stocks and buying ETFs to diversify risk amid the recent expansion in market volatility.
ETF investment strategies are also changing. While many investors still seek short-term price gains through leveraged ETFs, which track a set multiple of an underlying asset's daily return, purchases of "income-type ETFs," such as covered call and monthly dividend products that provide stable cash flow, are on the rise. Between June 23 and July 23, about 2 trillion won of retail funds flowed into covered call and monthly dividend ETFs. Analysts say that as the KOSPI has entered a correction phase and volatility has sharply expanded, the investment preference for stable distributions is growing stronger.
