The value of the yen has fallen to its lowest level against the won in nearly 18 years, yet individual investors are betting on a potential rebound. Over the past month, four related exchange-traded funds (ETFs) recorded negative returns, but individual investors have net purchased 6.751 billion won.
According to Koscom ETF Check, as of the close on October 12, the 'TIGER Japanese Yen Futures' recorded a return of -3.22%, while the 'PLUS Japanese Yen Short-Term Government Bonds (Synthetic)' saw a return of -3.35%. The 'RISE U.S. 30-Year Treasury Yen-Exposed (Synthetic H)' and 'ACE U.S. 30-Year Treasury Yen-Exposed Active (H)' experienced even larger declines, at -6.90% and -6.94%, respectively.
Despite the poor performance, individual investors continued to buy. During the same period, they net purchased 3.58 billion won in TIGER Japanese Yen Futures, 309 million won in PLUS Japanese Yen Short-Term Government Bonds (Synthetic), and 1.355 billion won in RISE U.S. 30-Year Treasury Yen-Exposed (Synthetic H). Additionally, 1.507 billion won flowed into ACE U.S. 30-Year Treasury Yen-Exposed Active (H). In contrast, foreign and institutional investors predominantly sold off these products, highlighting a stark difference in investment behavior.
This buying trend among individual investors may reflect a demand for bargain hunting in anticipation of a yen rebound. However, with the yen's continued weakness, it may be challenging for returns to recover quickly as investors hope. Analysts suggest that the Bank of Japan's (BOJ) interest rate hike stance, combined with the persistent U.S.-Japan interest rate gap and concerns over Japan's fiscal burden, are limiting the yen's strength. The won-yen exchange rate also fell to the 845 won range per 100 yen the previous day. Furthermore, yen-exposed ETFs that invest in U.S. long-term treasuries are influenced not only by the yen's value but also by U.S. long-term interest rates and bond prices.
While it is difficult to attribute the performance gap solely to the yen's weakness, the underperformance of yen products is notable compared to dollar-related ETFs. During the same period, 'KODEX U.S. Dollar Futures' recorded a return of -0.61%, and 'RISE U.S. Dollar SOFR Rate Active (Synthetic)' saw a return of 0.25%. The 'RISE U.S. 30-Year Treasury Active' and 'ACE U.S. 30-Year Treasury Active' also experienced smaller declines of -4.69% and -4.08%, respectively, compared to yen-exposed products.
Looking ahead, some analysts predict that a significant rebound in the yen will take time. Choi Kyu-ho, a researcher at Hanwha Investment & Securities, stated, "The market is wary of the possibility of intervention by foreign exchange authorities, so the likelihood of a rapid yen depreciation is low, but the yen's weak trend is expected to continue for the time being."
* This article has been translated by AI.
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