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Korea mutual funds' NAV growth slows to 0.3% in August as stocks fall

By Asia Asset Management  
September 20, 2019

South Korea’s mutual funds’ net asset value (NAV) grew 0.3% in August, slowing sharply from 2.4% in July as investors pulled out of stock funds and sought safer assets such as bonds and real estate amid uncertainties over the long-running US-China trade war.

Total NAV of mutual funds rose to 637.9 trillion won (US$533.5 billion) last month from 636 trillion won in July, the Korea Financial Investment Association (KOFIA) says in a report on September 17.

It was the fifth consecutive monthly increase since April, and the slowest since May when NAV was also up 0.3%.

Total assets under management of the mutual funds increased 0.5% to 635 trillion won in August from 631.9 trillion won in July.

NAV of equity funds fell 2.3%, or 1.8 trillion won, to 75.2 trillion won, primarily due to net outflows triggered by the decline in the domestic stock market from growing uncertainties caused by the US-China trade conflict, KOFIA says.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 2.5% in August.

But NAV of bond funds, real estate funds and special asset funds, which invest in alternative assets, all increased, underscoring investors’ growing preference for “safe assets”, the report says.

According to a Taiwan-based fund analyst, investors are expected to continue to switch out of stocks in favour of assets with lower risk.

“Although the KOSPI started to rebound from a three-year low in late August, investors remain highly cautious on domestic equities. They would rather put their money in low-risk assets, including bank deposits, fixed income or bond funds,” he tells Asia Asset Management, speaking on condition of anonymity.

Real estate funds recorded the largest net inflow of all mutual funds last month, drawing in 1.5 trillion won, followed by bond funds at 1.3 trillion won.