The Korea Exchange (KRX) is gearing up to launch the KTOP 30 index, a new headline benchmark to better represent the Korean stockmarket and the Korean economy. The index will be calculated from July 13.
“The country’s main index, Kospi, as it captures a large size of constituents, it could not appreciate as much as our economy grows. While the Korean economy saw a three-year economic growth of 3% on average, compared with 2.1% in the U.S., 1.4% in Germany, 0.8% in Japan and 0.7% in France, the Kospi index could not reflect the country’s economy well,” said Sungchae Ra, head of index management at KRX, in a statement.
KRX did not aim at commercialising the index as it was developed to better reflect market conditions, and as the index adopts a price-weighted method to capture market capitalisation, it is quite difficult to track, said a senior offer, index management department at KRX.
“However, we are currently receiving positive feedback from market players on the index to be used in exchange-traded funds (ETFs) and exchange-traded notes (ETNs),” he said. “Although it may be quite challenging to structure an ETF as it may need to hold physical positions, we are quite positive about ETNs as it will be tracking the yield of the index itself.”
Equity-linked securities (ELSs) and equity-linked bonds (ELBs) can also license the index but KRX has not yet received any requests from providers, said the official.
“It is too early to consider using this index in ELSs or ELBs, as the yield of the index is lower than the Kospi index and there are no futures to hedge against the index yet,” said an executive at a major securities firm. “We are not considering adopting this index at the moment.”
The KTOP 30 index comprises blue-chip stocks such as Samsung Electronics, Naver, Hyundai Motor, Hyundai Mobis, SK innovation, POSCO, KB Financial Group and 23 other popular shares. “The index has adopted the same calculation method as the Dow index, which well captures the volatility of each constituents,” Ra said, adding that there will not be any regular change of constituents, and that if needed, it will be decided through the index’s committee screening process.
In the South Korean structured products market, the Kospi 200 index is the main index in the country, with 20,969 outstanding products. Although there are other indices, such as Kospi, Kospi 100 and Kospi 200 Leverage, they are rarely used. Similar indices such as Dax are gaining traction in South Korea with 23 outstanding products. According to the SRP database, there are 54 outstanding products featuring Dow Jones 30 index globally; CAC 40 index is popularly used with 24,629 outstanding products followed by Hang Seng Index with 2,408 outstanding products. The Singaporean STI index has not appeared in the structured products market yet.
As of 13 July, while the Kospi index closed growing by 1.49%, the KTOP index closed at 6013.46 points, an increase of 0.8%. Furthermore, Kospi 200 index also closed at 249.84 points, increasing by 3.01% compared with the previous day.
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