Korean Retail Investors Continue Bull Run as Foreigners Pull out

Korean retail investors bought W100 trillion worth of domestic and global shares so far this year, which is already higher than the annual record of W87 trillion set over the whole of last year (US$1=W1,183).

According to the Korea Exchange on Sunday, Korean retail investors snapped up W70.40 trillion worth of shares on the Korea Composite Stock Price Index, W10.47 trillion on the Kosdaq and US$1.56 million worth of foreign shares. That adds up to W99.34 trillion.

But foreign investors have been on a selling spree as the Korean won tanked amid global uncertainties. They sold W30.73 trillion worth of shares in the Korean market, way more than the W24.71 trillion they sold over the whole of last year and approaching the all-time record of W35.92 trillion set in the global financial crisis of 2008.

Korean investors last year set the record for the highest net purchase with W63.81 trillion, of which W47.49 trillion were on the KOSPI and W16.32 trillion on the Kosdaq. Adding W23.35 trillion of purchase in foreign shares, the total amounted to W87.16 trillion. But that record has already been broken this year.

The KOSPI purchases made up the bulk with W70.40 trillion, over W20 trillion more than the last year's amount, while the tech-heavy Kosdaq's luster waned. But an alarming proportion was concentrated in Samsung Electronics with W37.33 trillion, followed by rival chipmaker SK Hynix with W5.58 trillion. The combined W42.91 trillion amounts to more than half of all purchases in the Korean stock market this year.

Overseas, far and away the most popular stock was Tesla with $1.65 billion followed by Apple with $570 million.

Small investors were undeterred by a sharp fall in the KOSPI this month and warnings that the market was dangerously overheated and kept buying shares worth W7.45 trillion. The KOSPI peaked on Aug. 4 at 3,280.38 points and has since fallen 6.7 percent, but retail investors were only spurred to greater frenzy by the lower prices.

Foreigners bought W372 billion worth of Korean shares in April, but sold more than they bought in all other months, totaling W6.7 trillion so far this month, the most since W8.52 trillion in May.

The major factor seems to be concerns about an oversupply of semiconductors. So far this year, foreign investors sold W29.26 trillion worth of stocks on the KOSPI, of which W26.95 trillion was Samsung Electronics and SK Hynix.

The possibility of early tapering by the U.S. Federal Reserve is forcing foreign investors to withdraw money from emerging countries. Other factors such as Afghanistan and the coronavirus pandemic are all working against Korea, which is highly dependent on exports and therefore vulnerable to global slowdowns.