South Korean mutual funds’ net asset value rebounded 2.7% in October from a 0.4% fall the prior month as domestic stocks rallied after the central bank cut its key interest rate, according to an industry group.
Total NAV of mutual funds rose 17.3 trillion won (US$14.7 billion) to 652.6 trillion won from 635.3 trillion won in September, the Korea Financial Investment Association (KOFIA) says in a report on November 13.
Their assets under management increased 17.2 trillion won to 648.2 trillion won.
All fund types except bonds gained as market conditions improved on the back of the Bank of Korea’s second rate cut in three months, a surge in Korean biotechnology stocks, and signs of easing tensions in the US-China trade conflict.
As a result, the value of private placements in all asset classes topped the 400 trillion won mark for the first time, KOFIA says.
The Bank of Korea cut its key rate 25 basis points to 1.25% on October 16.
According to Xav Feng, head of Lipper Asia Pacific Research, fund flows into the Korean mutual fund market are relatively healthy compared to other Asian markets. But whether a Korean mutual fund product can draw capital depends on the fund type and the underlying assets.
“Korean investors are risk taking. They have strong appetite for equity funds or leveraged passive products, especially under the current low interest rate environment,” Mr. Feng tells Asia Asset Management.
NAV of equity funds rose 2.8% to 78.19 trillion won in October as the benchmark Korea Composite Stock Price Index climbed 0.5%, recovering from a decline that started the final week of September.
NAV of money market funds jumped 13% to 116.6 trillion won due to lower corporate demand for funding. These funds drew 13.22 trillion won of net capital inflow, the most of all fund types.
NAV of bond funds fell 1.7 trillion won to 123.2 trillion won as investor preference for so-called safe assets waned.