Invest1 publisher3 min readPublished
Korea's biggest fund houses answer 91 trading halts with bonds, gold and covered calls
Sidecars fired 78 times and circuit breakers 13 times through the 14th. The five largest asset managers' ETF desks are now selling cash flow instead of direction.
The Investor · Invest desk
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What happened
- Heads of the ETF divisions at Korea's five major asset managers were asked to recommend products other than their own; their picks were dominated by asset-allocation funds combining stocks with bonds and gold, as well as high-dividend and covered-call funds that secure cash flow through dividends and option premiums.
- According to the Korea Exchange, through the 14th of this year sidecars were triggered 78 times and circuit breakers 13 times on the KOSPI and KOSDAQ, bringing total market stabiliser activations to 91.
- The KOSPI rose 23.97% in January and 19.52% in February this year, fell 19.08% in March, surged 30.61% in April and 28.45% in May, and plunged 22.19% in July.
- Across the six months disclosed (January, February, March, April, May and July), the average absolute monthly move of the KOSPI was 23.97 percentage points.
- The recommendations included a product holding the KOSPI 200 and domestic bonds in a 50-50 split.
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Why it matters
Korea's five largest asset managers were asked to name exchange-traded funds other than their own that clients should hold, and the answers came back dominated by asset-allocation funds combining stocks with bonds and gold, plus high-dividend and covered-call funds that generate cash from dividends and option premiums [1]. The picks are a verdict on the market itself: the Korea Exchange counted 78 sidecar triggers and 13 circuit breakers on the KOSPI and KOSDAQ through the 14th, or 91 stabiliser activations in a single year [2].
The monthly record explains the retreat from directional bets. The KOSPI rose 23.97% in January and 19.52% in February, fell 19.08% in March, gained 30.61% in April and 28.45% in May, then fell 22.19% in July [3]. Across those six disclosed months the average absolute monthly move was 23.97 percentage points [4]. An index that travels a fifth to a third of its value in a month is not a place where a position sized on a twelve-month view survives contact.
So the recommendations are structural rather than tactical. One product holds the KOSPI 200 and domestic bonds in a 50-50 split [5], another mixes a benchmark U.S. index with gold at 90-10 [6], and the covered-call entries pair top domestic high-dividend names with premiums from selling call options against them [7]. The same managers still advised investors to keep the door open to further market gains while turning attention to funds that spread risk using bonds, gold, dividends and options [8]. Those two instructions sit in tension. Selling calls converts uncertain upside into certain premium, which is a good trade in a month like March or July and an expensive one in an April that returned 30.61% [3][7].
The week the advice landed showed why nobody wants to commit. The KOSPI closed at 6,977.94 on the 14th, up 164.60 points or 2.42% [9], implying a prior close of 6,813.34 [10] and leaving the index 22.06 points short of 7,000 [19] after trading back above that level intraday for the first time in 15 sessions [14]. Foreign investors bought a net 3.0483 trillion won that day and 8.0698 trillion won across four sessions, after selling a net 7.1 trillion won the week before [11], a net two-week inflow of roughly 970 billion won [12], with 37.8% of the four-day total arriving in one session [13]. Breadth improved, with more than 71% of stocks advancing and the earlier concentration in a few names easing [14]. Samsung Electronics closed at 274,500 won, up 2.43%, and SK hynix at 1.645 million won, up 3.26% [15]. Hyundai Motor rose 8.24% on news that Hyundai Motor Group had shared its humanoid robot business plan with a first-tier supplier [16], and the U.S. producer price index for July rose 4.7% year on year, below expectations [17]. The manager survey was carried in Seoul Economic Daily's AI-assembled briefing product, built with Korea Press Foundation support [20].
Watch whether the stabiliser count keeps climbing from 91 [2], since that is the number the product shift is priced against. Watch whether foreign buying holds beyond four sessions given the prior week's 7.1 trillion won of selling [11]. And watch the Bank of Korea, after Senior Deputy Governor Ryoo Sang-dai addressed the July rate increase at a press briefing on the 11th [18].