According to a “2017 Q3 fund evaluation report” released by market data provider FnGuide on October 13, domestic equity funds showed a minus 0.13 percent return in the third quarter. However, the net asset of funds, including exchange-traded fund (ETF), stood at 41.1 trillion won (US$36.37 billion), up 1.46 trillion won (US$1.29 billion) from the previous quarter.
The fall in the price of small and medium-capitalization stocks turned the rate of returns into a negative. The earnings rate of active small and medium-capitalization equity funds in the third quarter was minus 2.86 percent.
Kim Kyung-mi, a researcher from the fund evaluation team at FnGuide, said, “As the consumer goods industry showed a dramatic downward trend due to conflicts with China over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) missile system, the drop in the price of related small and medium-capitalization stocks expanded. The earnings rate of small and medium-capitalization stocks slightly rose in August amid poor showings of large growth stocks as the KOSPI market entered an adjustment phase. However, it didn’t last long and was on a downturn.”
On the other hand, index equity funds put up a good show with the earnings rate of 1.5 percent in the third quarter. This was largely due to the rally in the KOSPI market in the early and mid quarter after numerous leverage funds were included. Index equity funds drew a net inflow of total capital of domestic equity funds over the same period.
Kim said, “Index funds showed a total of 991.2 billion won (US$877.4 million) growth in the third quarter as the demand of leverage funds, which had the most money, continued to rise during the period of the KOSPI expansion.”
Meanwhile, the earnings rate of domestic equity funds is likely to increase in the fourth quarter as well as capital will continue to flow into the market. Kim Hoo-jung, an analyst at Yuanta Securities, said, “Stock dividends are expected to have good performance in the fourth quarter. The current inflow of capital to mainly index funds can be expanded to stock dividends and small and medium-capitalization stocks.”