Korean investors turn to covered call ETFs as KOSPI slides
Korean retail investors are increasingly turning to covered call ETFs after the KOSPI index fell about 30 per cent from its peak and foreign outflows topped US$130 billion. The market has grown to 28.9 trillion won, and a new Hong Kong-listed CSOP product offers local access.
Korean retail investors have increasingly turned to covered call exchange-traded funds after a sharp reversal in the domestic stock market, according to CSOP Asset Management.
The KOSPI index has fallen by around 30 per cent from its peak after leading performance in the first half of 2026, data from Bloomberg as of October 15 show. Foreign investors have withdrawn over US$130 billion (HK$1.01 trillion) from Korean equities this year, with trading turnover down roughly 70 per cent from its late-May peak, according to Bloomberg data as of October 10.
Despite the outflows, Korea remains a global powerhouse in memory chips, automobiles, batteries and industrial manufacturing, CSOP said. The firm said the question for investors is not simply whether to buy or avoid Korean equities but whether there is a different way to hold them amid uncertainty and elevated volatility.
Covered call ETFs hold a basket of stocks while selling corresponding call options to generate premium income. In range-bound or modestly rising markets, that premium can enhance returns; in downturns, it can partially offset losses at the cost of capping upside.
Korea's covered call ETF market has grown to 28.9 trillion won (about HK$167 billion), up about 10 trillion won since early April, nearly doubled from end-2025 and more than quadrupled in under two years, according to Korea Exchange data as of September 28. In the second half of 2026, several Korean covered call ETFs had annualized distribution yields above 25 per cent.
Access for Hong Kong investors is widening. The CSOP KOSPI 200 Covered Call Active ETF (3537.HK), listed on the Hong Kong Stock Exchange in July, provides exposure to the KOSPI 200 index via futures while selling KOSPI 200 call options to collect premiums. The ETF aims to distribute monthly, with a target annualized distribution yield of approximately 36.70 per cent as of end-September, and will pay a monthly dividend of HK$0.29 per unit on November 5. The ex-dividend date is October 30, and investors must buy before the October 29 market close to be eligible.
CSOP noted that distribution yield is not total return, and covered call strategies are not risk-free. The fund is subject to risks including swap counterparty risk, KOSPI 200 futures contracts risk, Korean market risk, and risks relating to distributions paid out of capital. The KOSPI 200 Index is heavily concentrated in its top two constituents, which are in the same sector.