ETF Will Be Listed in the End of September

Exchange Traded Funds (ETF), which is a developed financial product and very popular in US, Europe, Japan, etc will be introduced to Korean Stock market in the end of September.

At the moment, Samsung Investment Trust Management has prepared KODEX 200, 50 and LG Investment Trust Management has prepared KOSEF 200 and they are waiting the amend of the regulation concerned.

▽ What is different= the price of ETF follows KOSPI 200 and 50 like Index Fund. The purchase of ETF has the same effects like to purchasing all of items included in the index with small amount of money. ETF can be traded frequently at various prices a day. So it can be changed in cash easily.

In case of ETF, it can be sold without actual possession and clear after purchasing.

▽ the method of investment= anyone can purchase ETF by opening an account of a stock company. The minimum unit of trading is 10. If KOSPI 200 index is 100 at trading day, according to the rate fixed by an investment trust management (Samsung is 100 times, LG is 10 times), the price of one unit of ETF will be 10,000 won and 1,000 won. In this case the minimum amount of trading is 100,000 won and 10,000 won.

Institutional investors can receive ETF as giving shares included in KOSPI 200 index and 50 index to the investment trust management.

Investors can make profits by the hedge trading or the difference of trading from the combination of ETF, share, futures and option.

In the future, if EFT for diversified index is introduced, institutional investors can modify portfolio without giving shocks to the market.

ETF follows a particular stock index like existing index fund and can be traded easily at stock market.

Suk-Ho Shin kyle@donga.com