Individual ETF investments fuel institutional buying amid Kosdaq’s ‘Thousand Kosdaq’ era
Amid the Kosdaq index surpassing 1,000 points last month, ushering in the ‘Thousand Kosdaq’ era, institutional net purchases exceeded 10 trillion Korean won for the first time in history. The securities industry analyzed that a significant portion of institutional buying stemmed from individual investors’ purchases of Kosdaq-listed exchange-traded funds (ETFs).
According to the Korea Exchange on the 1st, institutions recorded a net purchase of 10.1 trillion Korean won in the Kosdaq market last month. This marks the largest monthly institutional net purchase volume in Kosdaq history. The previous record was 1.4537 trillion Korean won in December 2021.
By daily trading, institutions engaged in six consecutive days of net buying from the 23rd to the 30th of last month. By type, financial investors led with 10.915 trillion Korean won, followed by pension funds and others at 143 billion Korean won.
The securities industry noted that the increase in financial investors’ net purchases was driven by individual investors’ net buying of Kosdaq ETFs. Typically, when individual investors purchase ETFs, securities firms acting as liquidity providers (LPs) buy the underlying index components in the market during the creation and redemption process, which is reflected as financial investor purchases.
Researcher Na Jeong-hwan of NH Investment & Securities stated, “The current drivers of the stock price rally are institutional investors, not foreigners, and a significant portion of this funding originates from individual investors’ ETF investments.”
The net purchases by financial investors reflect not only active buying by institutions but also structural factors where creation funds from individual investors’ ETF net purchases are recorded as financial investor buying in the physical market.
Na explained, “The sustained net buying by financial investors suggests that individual funds are flowing into the market indirectly through ETFs.”
On the 26th of last month, when the Kosdaq index hit 1,000 points for the first time in four years, individuals net purchased 595.2 billion Korean won worth of Samsung Asset Management’s ‘KODEX Kosdaq 150 Exchange-Traded Fund (ETF)’, which tracks the Kosdaq 150 index. This was the largest single-day net purchase on record.
While individuals clearly invested in the Kosdaq market via ETFs, government policies are also expected to fuel optimism. The National Growth Fund, slated for public release as early as June, is likely to use the Kosdaq index as a key benchmark (BM).
However, individual investors heavily sold individual Kosdaq stocks. According to the Korea Exchange, individuals recorded net sales of 9.267 trillion Korean won in the Kosdaq market last month. Notably, they engaged in profit-taking, particularly in secondary battery stocks. The most sold stock by individuals was EcoPro, with net sales of 1.135 trillion Korean won. EcoPro BM followed as the second-most sold, with 765 billion Korean won in net sales.
Amid this, stock market ‘churn’ reached its most active level in two years. The turnover rate of listed stocks in the Kosdaq market last month was 46.96%, the highest since January 2024 (50.71%).
