Mirae Asset Global Investments has launched five new thematic ETFs in South Korea, on the Korea Exchange, under its local Tiger ETF brand.
South Korean President Moon Jae-in announced the New Deal initiative in July.
The funds invest in Korea-listed equities of companies operating in what it refers to as ‘BBIG’ industries, namely Batteries, Biotechnology, Internet, and Gaming.
BBIG is an emerging term, coined locally, that refers to segments of the Korean economy that have outperformed in the digital-connect environment of the Covid-19 pandemic and that are tipped to benefit from the government’s self-styled ‘New Deal’ initiative.
Announced by South Korean President Moon Jae-in in July, the initiative has been designed to help combat the economic impact of the coronavirus.
South Korea has already weathered the Covid-19 storm better than any other OECD member with its economy predicted to contract by just 1% in 2020. This is due in part to an aggressive track and trace system launched early in the pandemic which helped to quickly flatten the epidemic curve and get the economy back on its feet.
The government’s New Deal aims to sustain that momentum by boosting growth and creating jobs through 20 trillion won (approx. $17 billion) of government stimulus over the next five years. The fiscal response will be channeled to strategically important industries across two main pillars – digital and low-carbon.
The ETFs
The new Tiger ETFs are linked to indices created by Korea Exchange’s indexing division. Each comes with an expense ratio of 0.40%. Four of the funds individually target BBIG industries:
Mirae Asset TIGER KRX Secondary Battery K-New Deal ETF (364980 KS)
Mirae Asset TIGER KRX Bio K-New Deal ETF (364970 KS)
Mirae Asset TIGER KRX Internet K-New Deal ETF (365000 KS)
Mirae Asset TIGER KRX Game K-New Deal ETF (364990 KS)
Each ETF selects the top ten Korea-listed stocks relevant to its target industry. The top three stocks account for 75% of the total exposure with weights of 25% each, while the remaining seven stocks are weighted by market capitalization within the remaining 25%.
The fifth fund is the Mirae Asset TIGER KRX BBIG K-New Deal ETF (364960 KS) which provides exposure across all BBIG industries by tracking the KRX BBIG K-New Deal Index. The ETF consists of the top three stocks from each of the four BBIG industries. Constituents are equally weighted.
Korea Exchange has also released a carbon-efficient green index, targeting solar and wind energy companies expected to benefit from the second major of the New Deal initiative, potentially opening the door to further ETF product development.