Major KOSDAQ-focused active exchange-traded funds in South Korea are sharply increasing their holdings of semiconductor materials, parts and equipment makers while trimming biotech and secondary battery stocks. As fund managers across asset managers turn their attention to KOSDAQ chip suppliers, inflows into active ETFs — long sluggish — are resuming.
According to the financial investment industry on the 24th, Samsung Active Asset Management's KoAct KOSDAQ Active and Timefolio Asset Management's TIME KOSDAQ Active held 62.72% and 52.11% in chip suppliers, respectively, based on the closing price on the 21st. DS Asset Management's DS KOSDAQ Active, launched on the 14th of last month, filled all 33 of its holdings with chip suppliers. While chip suppliers account for about 36% of KOSDAQ's total market value, the major asset managers have allocated more than half of their fund assets to the semiconductor ecosystem.
The shift in portfolios is even starker compared with the funds' listing dates. When TIME KOSDAQ Active listed on March 10 this year, biotech made up 38.05% of the fund while chip suppliers accounted for just 26.65%. The biotech weighting has since fallen to 17.72%, while chip suppliers have doubled. KoAct KOSDAQ Active also cut its biotech weighting from 24.60% on its listing date to 19.50%. Excluding Alteogen, the largest KOSDAQ stock by market value (7.46% and 7.11% in the two funds, respectively), the biotech weighting in both products falls to around 10%. DS KOSDAQ Active sold off all of the HLB and D&D Pharmatech shares it held early on, transforming into a pure chip-supplier fund.
The three funds' managers also share common favorites among chip-supplier stocks. Their top pick is Tes (095610), with an average weighting of 5.88% across the three funds. It was followed by Simmtech (4.41%), a printed circuit board maker, and PSK Holdings (031980) (4.02%), which makes packaging equipment for high-bandwidth memory (HBM). Some observers say that with signs of a KOSDAQ revival, inflows into active ETFs could gain momentum. According to ETF CHECK, the three products drew about 19.2 billion won ($14 million) in net inflows over the past month.
Behind the managers' focus on chip suppliers is earnings visibility. Regardless of swings in the share prices of large-cap chipmakers, demand for memory front-end and back-end processing and for substrates remains elevated, making earnings improvement likely, they say. The Presidential Office's announcement that it will push to enact a "mega special zone special act" and set up a 5 trillion won semiconductor fund is also a positive. "With KOSDAQ supply-and-demand unstable, the setup is to focus on chip suppliers with certain earnings rather than biotech with high uncertainty," an asset management official said. "Active ETF inflows could act as a factor improving supply-and-demand for KOSDAQ chip-supplier stocks."
Meanwhile, based on the closing price on the 21st, the top 50 KOSDAQ stocks by market value broke down by theme as follows: chip suppliers and information technology at 36.84%, biotech and healthcare at 35.25%, power, nuclear and robotics infrastructure at 13.58%, and secondary batteries at 11.55%. Led by Alteogen, the top stock by market value, biotech, secondary battery and robotics names such as Ecopro, Ecopro BM and Rainbow Robotics occupy the top four spots, but across the broader market the split between chip suppliers and biotech is clear.
