Cybersecurity exchange-traded funds are rallying after artificial intelligence-driven hacking struck South Korea's financial sector.
The TIGER Global AI Cybersecurity ETF returned 15.04% over the past month, from Sept. 7 to Oct. 6, according to Koscom's ETF CHECK data released on the 6th. The fund tracks the Indxx Cybersecurity index, which comprises the 40 largest global companies by market capitalization that draw more than 50% of revenue from cybersecurity, and invests in AI security firms worldwide. Identity security provider Okta carries the largest weighting at 10%, followed by CrowdStrike at 8.3%.
The SOL U.S. AI Software ETF and the TIGER Global Cloud Computing INDXX ETF returned 3.30% and 1.32%, respectively, over the same period. The SOL fund invests simultaneously in U.S. AI software companies and security firms, with Palo Alto Networks and CrowdStrike together accounting for 18% of its holdings. The TIGER Global Cloud Computing INDXX ETF also invests in both cloud and security companies.
Cybersecurity shares also rallied on the domestic stock market that day. AhnLab closed at 89,000 won, up 15.58% from the previous session, and Genians finished at 24,650 won, up 20.83%, with both hitting their highest levels this year. Fasoo AI rose 15.60% and SGA Solutions gained 15.61%. Raon Secure jumped 29.98% to 14,870 won, hitting its daily price limit. Behind the renewed attention to security stocks and ETFs are expectations that companies will step up security measures amid concerns over AI-enabled hacking. Analysts said anticipation of improved earnings at security firms is also at play.
Brokerage analysts expect interest in security companies to continue for some time as the importance of cybersecurity grows. The spreading push to rebuild security frameworks around "zero trust" is also viewed positively. Zero-trust security refers to a system that verifies access rights every time, on the premise that no access should be trusted. "The public sector is likely to recognize the seriousness and importance of cybersecurity and expand its application of security measures," said Kwon Myung-joon, an analyst at Yuanta Securities Korea. "Interest in cybersecurity companies will persist, given the seasonal strength of the fourth quarter and this series of incidents."
