Individual investors' fund inflows into exchange-traded funds (ETFs), which had surged amid the stock market rally earlier this year, dropped sharply in March, data showed.
Net ETF purchases by retail investors totaled 6 trillion won ($4.4 billion) from the beginning of March through March 26, according to Korea Exchange (KRX) and financial data provider FnGuide.
Even accounting for two remaining trading days in March, the figure falls far short of last month's net ETF purchases of 9.8657 trillion won. Compared with January's net purchases of 14.9765 trillion won, the amount plunged by roughly 9 trillion won in just two months.
Interest in ETFs itself has not faded, however. Retail investors' total ETF trading volume (buys plus sells) reached 218 trillion won in March, easily surpassing 200 trillion won. That exceeds trading volumes in both January (182 trillion won) and February (196 trillion won). Investors are actively buying and selling ETFs, driving up turnover, but net purchases are declining.
Notably, a wave of new actively managed ETFs tracking the KOSDAQ index launched this month and drew attention, yet failed to stem the overall decline in net buying. Among individual products, KoAct KOSDAQ Active attracted 786 billion won in inflows, ranking second behind KODEX Leverage (895.3 billion won) in retail net purchases. TIME KOSDAQ Active also drew 402.6 billion won, placing fourth after TIGER Semiconductor TOP10 (437.4 billion won).
This slowdown in ETF fund flows stands in stark contrast to trends in the main KOSPI market. Retail investors purchased a net 35.6325 trillion won worth of KOSPI-listed stocks from the start of the month through March 27.
It marks the first time individual net purchases on the KOSPI have exceeded 30 trillion won. The figure far surpasses the previous all-time record of 22.3384 trillion won set in January 2021, when the so-called "Donghak Ant Movement" — a retail investor-driven buying spree during the COVID-19 pandemic — was at its peak.
Retail investors bought 4.3442 trillion won worth of KOSPI stocks in January, scaled up to 8.5544 trillion won in February, and then poured in roughly four times the previous month's amount in March, mounting an aggressive bet.
As individual net purchases of ETFs declined, total ETF net assets — which had been soaring — also hit the brakes. Total ETF net assets peaked at 387.642 trillion won on February 27 but fell to 374.6788 trillion won as of March 26.
Experts say the shift stems from a change in investor sentiment as traders seek to maximize returns.
"Retail investors may have sold ETFs and switched to individual stocks on the belief that corporate earnings, led by semiconductors, will improve," said Ko Yeon-su, a researcher at Hana Securities (016360.KS). "Because ETFs hold multiple stocks, they can include names investors don't necessarily want."
Shin Seung-jin, head of investment strategy at Samsung Securities (016360.KS), also noted, "There could be demand for buying individual stocks to take advantage of volatility caused by the war." He added, "If stock prices fall equally, investors expect individual stocks to rebound faster than ETFs."
Meanwhile, net purchases by Korean retail investors in U.S. markets also dropped sharply this month as the New York stock market rally lost momentum.
Net purchases of U.S. stocks totaled $476 million (approximately 716.3 billion won) through March 26. Compared with $5 billion in January and $3.949 billion in February, the figure plunged to roughly one-ninth in a single month.
