Equity and bond funds remain gloomy on fears of rate hikes

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Digital charts in the Hana Bank trading floor in central Seoul show the Kospi price and the exchange rate between the dollar and the won on Friday. (Yonhap)

South Korean equity and bond funds disappointed investors in the first three months of the year, with many posting notable losses in profitability, according to data released on Sunday.

Equity funds with more than 1 billion won ($819,000) in assets have seen an average profitability loss of 7.89% since the start of the year on Sunday, according to data provided by the Financial Market. local FnGuide. Korean index funds, which track local stock indices closely, saw an 8.59% loss in profitability during the cited period.

Active equity funds, which periodically rebalance all stocks to match the proportions found in indices, saw a 6.29 loss in profitability over the same period.

By product, TIGER KRX BBIG K-New Deal Leverage, an equity trading fund sold by Mirae Asset Global Investments, had the lowest profitability among its equity fund peers, recording a 35% loss in profitability in the first trimester. KODEX Game Industry ETF, which is tied to the metaverse and non-fungible tokens, also shocked investors with a loss of 28.14% over the same period.

Local bond funds have also posted lackluster performance since the start of the year, although significantly better than equity funds. Bond funds with more than 1 billion won in assets saw an average profitability loss of 1.05 percent in the first three months.

Treasury bond funds experienced an average profitability loss of 2.45%, while regular bond funds lost 1.34%. KB KBSTAR 30-Years Treasury Bond Enhanced ETF, one of the leading treasury bond funds here, posted a loss of 12.89% during the quoted period.

Analysts cite heightened market volatility due to growing signals of monetary tightening from the US Federal Reserve since the start of the year, coupled with risks stemming from the Ukraine crisis. The country’s benchmark Kospi fell 7.99%, while the tech-heavy secondary Kosdaq fell 9.03% in the first three months of the year.

Since bonds have an inverse relationship with interest rates, bond funds have been affected by the US Fed’s reduction in its bond purchases and the indication of an interest rate hike as early as March 2022. BOK has already made three rate hikes since August last year. pushing the benchmark rate up to 1.25% currently.

“The bond market weakened due to the Ukraine crisis, which fueled commodity prices and inflation fears,” said Kim Ji-man, analyst at Samsung Securities.

“The market is likely to experience high volatility for the time being and will likely only calm down after the country’s strong inflationary pressure subsides,” he added.

By Jung Min-kyung (mkjung@heraldcorp.com)

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