Retail investors now match foreign traders in ETF price influence, KB Securities finds

Retail investors' ability to move exchange-traded fund prices has grown sharply over the past six years, with their market influence now nearly on par with that of foreign investors, according to new research.

A report published Wednesday by KB Securities, titled "Which ETFs Actually Respond to Retail Buying?", found that 47.5 percent of days on which retail investors made net purchases of ETFs also saw those funds post gains this year — a metric the brokerage calls the "co-movement ratio."

The analysis covered 615 domestically listed ETFs backed by Korean assets, tracking whether retail net purchases and ETF returns moved in the same direction over the past six years.

The co-movement ratio climbed steadily from 38.0 percent in 2021 to 39.6 percent in 2022, 41.7 percent in 2023, 41.9 percent in 2024 and 45.1 percent in 2025, reaching 47.5 percent so far this year.

The gap with foreign investors, who long dominated the ETF market, has narrowed dramatically. In 2021, the difference in co-movement ratios between retail and foreign investors stood at 13.6 percentage points — 38.0 percent for retail versus 51.6 percent for foreigners. This year the figures are 47.5 percent and 47.7 percent, respectively, in effect the same level.

KB Securities said retail investors' influence in the ETF market has become comparable to that of foreign investors. "As the volume of retail money flows has grown, so has its impact on the stock market," said Park Yu-an, a researcher at KB Securities. "Improved access to information has also made retail investors' trading patterns more similar to those of foreign investors."

Retail influence was most pronounced in mid-size ETFs — those with net assets between 100 billion won and 1 trillion won — rather than in large funds. ETFs with net assets of 100 billion to 500 billion won ($72 million to $360 million) posted a co-movement ratio of 47.9 percent this year, while those in the 500 billion to 1 trillion won range recorded 47.7 percent.

By contrast, ETFs with net assets exceeding 1 trillion won had a co-movement ratio of just 40.2 percent.

The retail buying effect was especially strong in certain thematic ETFs. The TIME Korea Value-Up Active ETF recorded a co-movement ratio of 65.7 percent, the SOL Semiconductor Front-End Process ETF came in at 61.8 percent, and the ACE Life Asset Shareholder Value Active ETF posted 59.4 percent. In each case, retail purchases coincided with price gains well more than half the time.

Returns on those days were also solid. For the SOL Semiconductor Front-End Process ETF, the average return on days of retail net purchases was 1.25 percent over last year and this year combined, with this year's average reaching 3.20 percent.

Leveraged ETFs told the opposite story. The KODEX Leverage ETF had a co-movement ratio of just 12.5 percent, the KODEX Kosdaq150 Leverage ETF 13.8 percent, and the TIGER Leverage ETF 17.2 percent — meaning prices more often fell on days when retail investors were net buyers.

That stands in sharp contrast to foreign investors, whose co-movement ratio for the KODEX Leverage ETF reached 55.8 percent. Park said retail flows into leveraged ETFs appear to be driven more by bargain-hunting than by momentum chasing. "It seems retail buying tends to come in early in a price decline, which explains why the co-movement ratio ends up low," he said.