Kiwoom Securities USA, the U.S. subsidiary of Kiwoom Securities (039490), will list a Korean semiconductor exchange-traded fund on the U.S. market, the first time a Korean brokerage has launched an ETF under its own brand in the United States. Industry watchers call it the first attempt to expand Korean brokerages' global operations from overseas stock brokerage into the supply of financial products.
Kiwoom Securities USA will begin trading the KICK Korea Semiconductor Index ETF (KCHP) on the New York Stock Exchange Arca on the 15th, local time, according to the financial investment industry on the 11th. The company filed its registration statement with the U.S. Securities and Exchange Commission on June 26, and the filing took effect on the 9th of this month. KCHP tracks the Across Korea Semiconductor Index, which invests in 20 major Korean semiconductor stocks including Samsung Electronics (005930) and SK hynix (000660). The total expense ratio is 0.65%, and no single stock can account for more than 20% of the fund.
More funds are in the pipeline. Preliminary registration statements for the KICK CPU ETF (XPU), the KICK Space Data Center ETF (SDC) and the KICK Optical and Networking Equipment ETF (OPNE) were filed with the SEC last month. The three funds invest in companies tied to central processing units, space data centers, and optical and networking equipment, respectively.
The industry is focusing on the fact that a Korean brokerage is expanding its overseas business model for the first time. While brokerages have concentrated on handling overseas stock trades, Kiwoom has broadened into a product business that supplies funds it designed itself to local investors. Unlike in Korea, where setting up and managing ETFs is restricted to asset management firms, companies in the United States can enter the market by working with local platforms. Local investors can also gain exposure to Korea's semiconductor industry without holding a Korean brokerage account, which could improve access to Korean companies.
To that end, Kiwoom partnered with local manager Exchange Traded Concepts and chose a white-labeling structure. ETC handles local infrastructure such as fund management, accounting and regulatory compliance, while Kiwoom Securities USA serves as sponsor, taking charge of product design and brand strategy. The arrangement cuts the cost of building initial operating infrastructure and lets the firm focus on product development. Hanwha Asset Management previously listed KDEF, which invests in Korean defense companies, and KMCA, which covers core manufacturing, on the U.S. market through ETC.
The U.S. ETF market had $16.4 trillion in net assets at the end of August this year, according to FactSet, 49 times the size of the Korean market at about 450 trillion won. Competition is intense, with more than 1,000 new ETFs listed through August this year. Kiwoom Securities USA aims to diversify its overseas revenue streams by strengthening its own product capabilities. "We are giving priority to strengthening our in-house management capabilities so we can handle a wider and more differentiated range of products," a Kiwoom Securities official said.
