Individuals Command Greater Control on Bourse
By Yoon Ja-young
Staff Reporter
Individual investors, called the ``ants corps'' here, have become key drivers of the local stock market, armed with sufficient knowledge and clever strategies.
There was a massive withdrawal of money by individual investors from funds investing in equities when the KOSPI reached 1,400 or 1,500, on the decision that it was about time ascent should slow down. The outflow from the equity type funds totaled 2.9 trillion won then.
As the rally continued against the expectation of market participants, however, individual investors are returning to the stock market. The balance of the equity type funds surpassed 57 trillion won last week, according to the Asset Management Association of Korea _ with over a 100 billion won influx daily.
``The shift of funds from banks to securities firms continued in May,'' said Seo Young-soo, an analyst at Kiwoom.com Securities. He estimated there to be a considerable amount of money transfer from banks to CMA accounts at brokerage firms, on top of the inflow to equity type funds.
The most notable bullish factor, however, is direct investment by individuals, according to Seo. ``The number of new customers at securities firms grew over three times in May from a year ago, and the money deposits at brokerage firms increased by 1.8 trillion won,'' Seo said. He said it would raise the daily transaction of stocks to 8 trillion won from the current 6.5 trillion won.
Lee Seung-woo, an analyst at Shinyoung Securities, also attributed the bullish market to the individual investors who increased credit transactions, or the stock investment using loans.
Relying on the ample liquidity and using cleverer strategies than before, individual investors have started exercising a major influence on the market.
Lee analyzed the buying and selling patterns of each market participant to see whether their decision went in the same direction with the index. Individual investors tended to be losers in the market as their transactions often went against the direction of the index. ``The coincidence rate between the individual investors and the index curve was only 25 percent on the KOSPI until last year, while the rate was 64 percent for foreigners and 54 percent for institutional investors,'' Lee said. Consequently, they were not exerting as much influence on the bourse as other market participants
Recently, however, they are having a major influence on the bourse. The probability of the individual investors moving in the same direction with the index was 67 percent so far this year, Lee said, while the probability was only 17 percent for institutional investors and 50 percent for foreign investors.
Whenever the index falls, individual investors have been pulling up the curve as if they've been waiting for an opportunity to buy stocks at lower prices. The short-term drop of the index followed by massive buying of the individual investors has become a new trend on the bourse, according to analysts.
Analysts said that retail investors will continue to show greater interest in stocks and increase their positions in the coming months, allowing the stock market to sustain its long-term gains. They said that the market may face a correction this week after recent steep gains, but retail investors are expected to provide a cushion against profit-taking by foreign investors as they are looking for opportunities for bargains.