Posted inFund Flows

ETF demand boosts South Korea fund inflows

Funds have seen net inflows for four consecutive quarters, Morningstar data shows.
Koreans favorite side dish, Kimchi

A total of KRW4.1trn ($34.65bn) of new money in the third quarter of 2021 was drawn to the Korean fund market, although the net inflow was smaller than the KRW6.4trn recorded a quarter earlier, according to Morningstar.

Although open-end funds saw KRW 1.1trn of net outflows between 30 June and 30 September,  ETFs attracted KRW5.1trn of net inflows, which the most in a year.

During the quarter, August had the highest net inflows of KRW3.2trn after slight outflows in July.

Looking at Morningstar categories during the quarter, the Korea large-cap equity category saw the largest inflows of KRW2.3trn. In this category, KODEX 200 was the most popular, bringing in KRW1.3trn of net inflows alone, followed by TIGER Top10’s KRW389.7bn.

The global equity category ranked the second with net inflows of KRW1.4trn. In this category, MiraeAsset TIGER Global Lithium & Battery Tech Solactive (Synth) saw the largest inflows of KRW657.8bn, followed by KIM Wellington Global Quality Feeder Equity Hedged fund with KRW182.5bn of new money.

Bond outflows

“On the other hand, the main bond categories received the greatest net outflows during the quarter, reversing the trend we saw from earlier this year,” Andy Seunghye Jung, manager research at Morningstar Korea, said in a report.

The Korea Bond category, for instance, bled KRW1.1trn in the third quarter after a combined KRW5.7trn of net inflows from the previous two quarters, amid higher inflation concerns.

In the ESG segment, South Korea was overtaken by Taiwan by asset size in Asia ex-Japan. It is now ranked as the third largest market with KRW5trn of assets under management.

Net inflows to ESG funds significantly slowed in the third quarter to just KRW14.2bn, compared with KRW925.9bn in the second quarter and KRW2.1trn in the first quarter of 2021.

This is in line with the broader market trend where fixed income funds had the heaviest outflows, according to Jung. The KIM eShort-term ESG Bond fund, Woori HiPls ST Feeder Supr ESG Bond fund, as well as KIM Credit Focus Feeder ESG Bond fund, saw KRW380bn of net withdrawals altogether in the third quarter.

Part of the Mark Allen Group.