Space ETFs Plunge, Investor Losses Mount

Domestic Aerospace Exchange Traded Funds (ETFs), which had risen on expectations of a SpaceX IPO, have recently fallen sharply, recording the lowest returns. ETFs are funds that can be easily bought and sold on stock exchanges like individual stocks and are designed to track specific indices. In particular, over the past week, among domestic ETFs and general products, 'TIGER US Space Tech' (-11.63%), 'SOL US Aerospace TOP10' (-9.86%), 'ACE US Space Tech Active' (-9.33%), and 'KODEX US Aerospace' (-9.02%) experienced declines.

The background to this sharp fall includes a flood of profit-taking after a short-term overheating period, as well as an analysis that the product structure, which increased the weighting of small private space companies (New Space) amid competition among asset managers, amplified volatility. Notably, on April 19th, AST SpaceMobile's satellite failed to enter normal orbit during its launch, and this stock was included with a weighting of over 10% in most domestic space ETFs.

Over the past week, Rocket Lab and AST SpaceMobile fell 13-14%, while Redwire fell 17%, and BlackSky Technology, with a market capitalization of $1.1 billion, plummeted by more than 20%. Small-cap stocks exhibit high volatility due to low liquidity and sensitivity to news.

The domestic space ETF market, which expanded to nine products since its first listing in November last year, saw significant capital inflows recently but exhibited sluggish performance. Increased competition among asset managers to differentiate their products, leading to a higher proportion of small private space companies, has been cited as a factor amplifying volatility. This trend appeared with larger drops in recently listed, later-entrant ETFs. While existing products pursued stability by including large-cap stocks in aviation and defense alongside space themes, ETFs newly listed this year have concentrated on 'New Space,' significantly increasing the proportion of purely private space companies.

Some in the industry view this adjustment as a "breather" following short-term overheating, given that the long-term growth potential of the space industry remains valid. It is analyzed that profit-taking occurred, especially after periods of rapid ascent such as Rocket Lab's over 300% surge in the past year. With various events remaining, including the development of the Neutron rocket, expanded NASA contracts, and expectations for a SpaceX IPO, there is potential for a rebound after the correction.