Signs are emerging of capital flowing out of domestic equity-focused exchange-traded funds (ETFs) for the first time this year since the beginning of August.

Analysts suggest that as the domestic stock market experiences volatility, investors are turning their eyes back to overseas assets.

According to Koscom CHECK and Samsung Securities on the 11th, a net outflow of 410 billion won was recorded in the domestic ETF market from the 3rd to the 6th.

Even in July, when the Kospi experienced severe volatility, 19.2 trillion won flowed into the ETF market over the month, but funds have begun to flow out as August commenced.

In particular, 715 billion won flowed out of domestic asset ETFs.

This contrasts with the inflow of 323 billion won into overseas asset ETFs.

Although much of August remains, this is the first time this year that a capital outflow has occurred in domestic equity ETFs.

During the preceding seven months, the monthly average influx of capital into domestic equity ETFs stood at 8.5 trillion won, and even last month, when volatility was severe, a net capital inflow of 14 trillion won took place.

In contrast, 323 billion won flowed into overseas asset ETFs during the same period.

The trend of 5.1 trillion won entering in July is continuing into August.

The outflow of funds from domestic asset ETFs is analyzed to be driven by deepening volatility in the domestic stock market and tightened regulations on single-stock leverage.

In particular, it is estimated that capital outflows from single-stock leverage products account for a significant portion of the exodus of funds from domestic asset ETFs.

Following the tightening of entry regulations on July 31st for single-stock leverage products based on Samsung Electronics and SK Hynix, 290 billion won and 720 billion won flowed out of Samsung Electronics and SK Hynix leverage products, respectively, since the start of August.

Jeon Gyun, a researcher at Samsung Securities, analyzed, "It appears that some of the capital exiting domestic assets flowed into overseas assets," adding, "As the U.S. stock market showed a strong rally in August, breaking all-time highs, investment demand for overseas asset ETFs expanded, centered around overseas stocks."

However, even amid the outflow of funds from domestic equity ETFs in August, 131 billion won flowed into Kosdaq ETFs.

Researcher Jeon stated, "While the Kospi continued a sluggish market, relatively strong technical rebound momentum emerged, and it appears that capital inflows into Kosdaq ETFs actively took place as a form of bargain hunting."

In addition, capital inflows into covered call ETFs continued within domestic equity ETFs.

Particularly in July, which saw severe volatility, 1.5 trillion won—the largest amount this year—flowed into covered call ETFs.

This is interpreted as growing investor interest in covered call ETFs, which can partially offset downside risks and volatility increase risks in the stock market.

(Photo: Yonhap News)