The Korea Stock Exchange (KRX) is rapidly increasing its pool of exchange-traded notes (ETNs), with investors now able to access 36 ETNs with various and diversified exposures. “Although the trading value and volumes are still behind Japan, we were able to exceed the number of ETNs listed by the Tokyo Stock Exchange in the number of new issues, with 29 ETNs listed,” said Byungin Cho, head of the ETN market team at KRX.

Shinhan Investment listed four ETNs linked to the Dow Jones Commodity Index Inverse Brent Crude TR, Dow Jones Commodity Index Inverse Gold TR, Dow Jones Commodity Index Inverse Silver TR and the Dow Jones Commodity Index Inverse North America Cooper TR in the middle of June. “As these ETNs will benefit when commodities futures prices fall, investors would be able to invest freely, betting on the rise and fall of the commodities price,” said Cho.

WTI Crude Oil and Brent Crude Oil frequently experience price reversal and differences in the rollover price depending on supply and demand, and investors would be able to shift between two underlyings depending on the price and market situation, he said.

KRX has also listed the True Target Volatility 20 Kospi Futures ETN by Korea Investment & Securities. “As this ETN will be adjusting Kospi 200 index futures investment proportionally every day to reach the target volatility of 20%, we expect it will serve to achieve excess returns in a low volatility environment, as well as prevent a sudden plunge when market volatility increases,” said Cho.

On June 25, KRX will list the Able Monthly Best 11, a new ETN issued by Hyundai Securities that tracks 11 of 150 big-cap shares from the Kospi index. “We believe this ETN will serve the needs of investors who wish to invest in large capital shares while enjoying upward momentum through active management,” Cho said.

In addition, NH Investment & Securities will be listing 12 ETNs tracking the top five shares in 12 different sectors – energy, essential consumer goods, shipbuilding, software, IT hardware, transportation, automobiles, medical, chemical, bio, medicine and construction. “While sector ETFs serve as one of the major investment vehicles in the US, accounting for 15% of the market, in South Korea, [these sector ETFs have a] 2.9% market share,” said Cho. “[But] we are quite positive about the expansion of the sector investment.”

As of June 22, the ETN market in South Korea had reached 39,230,320 in the number of contracts traded, with the trading volume at KRW602bn (US$546m) and total market value at KRW18.8tr. The True Inverse Eurostoxx 50 ETN and newly launched True Target Volatility 20 Kospi Futures ETN are the two best-performing ETNs, delivering 385% and 215% respectively since launch; Samsung Securities’ Perfex High Dividend Europe Equity ETNs registered a 190% increase in value since launch.

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