Crude oil, energy and inverse products swept the top of the return rankings in Korea's exchange-traded fund (ETF) market during March, as war between the United States and Israel on one side and Iran on the other continued. Products benefiting from surging international oil prices posted the highest gains, while inverse ETFs betting on market declines and safe-haven assets centered on the dollar and ultra-short-term bonds also climbed into the upper ranks.
According to the Korea Exchange (KRX), crude oil products claimed the No. 1 and No. 2 spots for ETF returns from March 3 to 31. 'KODEX WTI Crude Oil Futures (H)' ranked first with a 61.54% return, and 'TIGER Crude Oil Futures Enhanced (H)' came in second at 57.71%. During this period, retail investors net sold a combined 17.3 billion won ($12.7 million) of the two ETFs, suggesting they failed to capture the actual gains.
The rally was driven by rising crude oil prices amid a bottleneck at the Strait of Hormuz. Since the outbreak of the Middle East war, Brent crude futures prices for May delivery surged from the $77 level to $112.78 on March 31. As rising international oil prices pushed up crude futures prices, the underlying asset values of ETFs tracking them increased, directly translating into returns.
With market anxiety spreading, inverse products also delivered solid returns. Nearly half — 23 out of the top 50 — were inverse products, and they claimed six of the top 10 spots. 'RISE 200 Futures Inverse 2X' gained 35.42%, 'PLUS 200 Futures Inverse 2X' rose 35.10%, and 'KODEX 200 Futures Inverse 2X' climbed 34.87%. The gains are attributed to the combination of a sharp domestic stock market decline and a surging exchange rate. The KOSPI fell 19.08% in March, marking its fourth-largest monthly drop on record after October 1997 (−27.25%), October 2008 (−23.13%) and May 1998 (−21.17%).
As sharp price swings continued, trading activity was brisk. 'KODEX 200 Futures Inverse 2X' and 'KODEX Inverse' accounted for 84.67% of total trading value among the top 50 products. Their respective trading values were 29.618 trillion won and 13.634 trillion won. Retail investors sold a total of 714.6 billion won worth of the two inverse ETFs.
At the same time, safe-haven ETFs also posted solid returns. Sixteen dollar- and short-term bond-related products — including 'KODEX US Dollar Futures Leverage,' 'KODEX US Money Market Active' and 'PLUS US Short-Term Corporate Bonds (AAA–A)' — ranked in the top 50. Their gains generally ranged from 6% to 13%, lower than crude oil or inverse products, but they are credited with serving as a defensive shield during the market plunge.
Experts said the market had partially priced in the worst-case prolonged-war scenario and stressed that attention should be paid to the further direction of international oil prices and their aftermath. "West Texas Intermediate (WTI) is showing some retracement from the worst-case scenario, and the won-dollar exchange rate fell by about 30 won during intraday trading today, signaling that the market is shedding some of its extreme risk," said Kim Du-eon, a researcher at Hana Securities. "Whether the KOSPI can mount a full recovery will depend on confirmation of oil price stabilization along with a shift to net buying by foreign investors."
