The influence of exchange-traded funds (ETFs) on the stock market is expanding as the overall size of the ETF market grows and the number of concentrated-stock ETFs increases. Last week, ahead of the options expiration date, concerns emerged that rebalancing of ETF underlying indexes could weigh on market supply and demand.
Analysts are also advising that strategies leveraging stocks newly added to ETFs or those with increased weightings as investment ideas are worth considering.
According to financial investment industry sources on the 13th, it is estimated that ETFs with a total net asset value of 22 trillion won underwent rebalancing around the options expiration date on the 8th. Notable examples include TIGER Semiconductor TOP10, with net assets of 9 trillion won, and SOL AI Semiconductor TOP2 Plus, with net assets of 530 billion won.
These ETFs are understood to have reduced their exposure to Samsung Electronics, which had exceeded the per-stock limit (Cap), through rebalancing. In TIGER Semiconductor TOP10, the weight of Samsung Electronics decreased from 27.83% at the end of last month to 25.5%, while in SOL AI Semiconductor TOP2 Plus, it fell from 24.99% to 24.28%.
Analysis suggests that the influence on the stock market has grown as the total net assets of the ETF market reached 450 trillion won and the scale of domestic equity ETFs expanded. In particular, with a recent increase in ETFs focused on investing in a small number of stocks such as Samsung Electronics and SK Hynix, ETF trading is increasingly moving individual stock prices. Stocks added to ETFs or given higher weightings tend to see their share prices rise, while those removed from the funds tend to see their prices fall.
Previously, when index provider FnGuide changed the industry classification of SK Square from complex industries to semiconductors in June, 25 ETFs made net purchases of SK Square worth approximately 6 trillion won over a period of just over one month. During this period, SK Square’s share price rose by 24%.
Yoon Jae-hong, a research analyst at Mirae Asset Securities, said, “The influence on individual stocks is increasing as domestic equity ETFs grow and the proportion of concentrated-investment ETFs with 20 or fewer constituent stocks rises.” He added, “Cases where stocks newly added to ETFs or those with increased weightings show share price increases after a time lag are becoming more common.”
Accordingly, experts advise that strategies focusing on stocks newly added to ETFs or those with rising weightings remain effective. According to Mirae Asset Securities, many of the stocks newly added to ETFs in October were KOSDAQ semiconductor names such as Rino Industrial, Solbrain, and STI. Hanwha Systems and Cosmax were also newly added to three and four ETFs, respectively. Stocks whose weightings within ETFs have recently increased include HPSP, Doosan Enerbility, Isu Petasys, Iotech, and L&F.
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