Korea’s dollar futures ETFs deliver near 17% yields on U.S. dollar rally

2019.08.07 13:42:43 | 2019.08.07 14:34:21

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Funds tracking U.S. dollar futures index in South Korea have been yielding handsome returns of nearly 17 percent due to steep strengthening of the greenback.

According to data compiled by local market tracker FnGuide on Wednesday, exchange-traded funds (ETFs) that track futures contract of the U.S. dollar against the Korean won with a target amount of 1 billion won ($824,000) or more have delivered up to near 17-percent yield this year as of Monday. The dollar futures index tracking ETFs generate higher yields when the value of U.S. dollar goes up, and their gains are generally much bigger than non-leveraged investment products.

The top performers in the country were Samsung KODEX USD Futures Leverage ETF and Mirae Asset TIGER USD Futures Leverage ETF that each yielded 16.88 percent this year. Kiwoom KOSEF USD Futures Leverage ETF also performed well, yielding 15.70 percent.

They stand in vivid contrast to local stocks, whose returns averaged minus 3.48 percent for the same period.

The strong dollar, in contrast, has dealt a blow on dollar futures inverse ETFs that generate profits when the value of dollar falls. Kiwoom KOSEF USD Futures Inverse 2X ETF lost 15.21 percent and Mirae Asset TIGER USD Futures Inverse 2X down 14.72 percent.

Market experts forecast the greenback to continue to rally amid growing uncertainties in global financial markets due to the escalating trade war between the U.S. and China.

The Korean currency breached the psychologically-important 1,200 threshold versus the U.S. dollar on Monday, the first time since January 11, 2017.

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Korean financial markets, along with its foreign peers, tumbled after the Chinese currency fell below 7 yuan against the U.S. dollar for the first time since 2008 amid speculation that Beijing intentionally weakened the yuan after U.S. President Donald Trump vowed to slap additional 10-percent tariffs on $300 billion worth of Chinese goods.

The Korean won is expected to stay above 1,200 against the dollar for a while as the country’s economic growth outlook remains dim on multiple trade woes, including the U.S-China trade war escalation and the deepening trade row with Japan over diplomatic issues, said a Kyobo Securities analyst.

By Kim Je-lim and Cho Jeehyun

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