Kosdaq Tops 1,200 as Retail Investors Rush to Sell ETFs

Source

Korea Economic Daily

Summary

Retail investors moved to take profits by heavily selling Kosdaq ETFs after the Kosdaq index climbed above 1,200.
Retail investors posted large net sales centered on KODEX Kosdaq150, KODEX Kosdaq150 Leverage and active Kosdaq ETFs.
The market acknowledged rising short-term valuation pressure and demand for volatility management, but medium- to long-term supply-and-demand conditions remain favorable thanks to the government’s Kosdaq market revitalization policy and higher pension-fund allocations.

Forecast Trend Report by Period

Leverage, Active ETFs Lead Selling

The Kosdaq has extended its rally after breaking above 1,200, but retail investors have been dumping Kosdaq exchange-traded funds in size. The selling suggests they are taking profits after the index’s sharp run-up in a short period.

Data from ETF Check on April 27 showed that five of the 10 ETFs most heavily net sold by retail investors over the past week were products investing in the Kosdaq market. The biggest outflow came from KODEX Kosdaq150, with 231 billion won leaving the fund during the period. KODEX Kosdaq150 Leverage, which tracks twice the daily return of the Kosdaq 150 Index, ranked second with 224.8 billion won in net selling.

Selling also continued in active Kosdaq ETFs listed in succession last month. KoAct Kosdaq Active ranked seventh with 58.7 billion won in net selling, while TIME Kosdaq Active ranked ninth with 17 billion won.

The market views the retail selling as a short-term adjustment. The Kosdaq’s rapid gains have raised valuation pressure, while the market’s heavy weighting toward growth stocks has also increased demand for volatility management.

Medium- to long-term supply-and-demand conditions are still widely seen as favorable. In line with the government’s policy drive to revitalize the Kosdaq market, large pension funds have begun raising their allocations to Kosdaq stocks, and venture and growth funds focused on small- and mid-cap shares are being launched. Investor sentiment built during the main-board rally is also spreading to key Kosdaq sectors such as semiconductor materials, parts and equipment, renewable energy and space.

Yang Ji-yoon, Hankyung.com reporter yang@hankyung.com