Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
'Retail investors' emerging as influential force in securities market
An electronic board showing the closing price of the benchmark KOSPI on Wednesday is seen behind a dealer at KB Kookmin Bank in Seoul. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Retail investors are emerging as a “new influential force” in the local financial market, helping securities firms generate stronger profits in the first three months to March 31.
Retail investors have long been regarded as a “minority” in the local stock market and categorized as a less powerful group than institutional and foreign investors in terms of scalability of their influence on the country's main KOSPI and junior tech-heavy KOSDAQ markets.
But this year, at least, such thoughts are being challenged as retail investors are on track to make their presence felt in the money and stock markets at a time when foreign and institutional investors have reduced their activities amid fears over the COVID-19 pandemic, data showed.
While Mirae Asset Daewoo, the nation's largest securities firm by market capitalization, reported a 2.4 percent decline in its first-quarter operating profit, year-on-year, stock market analysts and observers said the results were “pretty decent” while the local economy was suffering setbacks amid the pandemic.
Other top-tier securities firms also reported notable growth in their brokerage commission profits.
NH Investment & Securities posted 103.2 billion won in profit in that category, up 61.8 percent, quarter-on-quarter. But it reported a decline of 77.3 percent in first-quarter operating profit, year-on-year. Given this, NH's earnings shock in the latest quarter would have been bigger if it had failed to chalk up enough profit in brokerage commissions.
Retail investors' massive buying of Korean stocks ― which offset the foreign exodus from the market because of the pandemic ― also helped Shinhan Investment follow in the footsteps of other securities firms. The company achieved a first-quarter brokerage commission profit of 143.2 billion won ($197 million), up 70.7 percent from the previous quarter.
The benchmark KOSPI took a dive in March when foreign binge selling showed little sign of abating. But retail investors identified the market freefall as an opportunity to purchase promising stocks at a lower price.
In March alone, retail investors net purchased 11.4 trillion won in the stock market, while foreigners net sold stocks worth over 12.8 trillion won. Market pundits voiced their consensus that retail investors' recent rush was noteworthy enough to call the move an “appearance of a new tribe” in the market.
“Retail investors have recently started to exert huge influence by engaging in a mass buying of local stocks worth more than 25 trillion won from the beginning of 2020 despite foreigners' net selling of more than 19 trillion won,” Meritz Securities economist Kang Bong-joo said.
The analyst said the rise of retail investors would not end up being a “temporary phenomenon,” in that they constantly show willingness to learn more about investment opportunities.
He said the rise of retail investors could prop up the local securities market in the future, as they have definitely blocked the main bourse from collapsing further in March when virus-driven market turmoil reached its peak here.
In mid-March, the KOSPI plunged below the 1,500-mark for the first time since July 2009 on a foreigners' selling spree amid growing fears over the virus. But the index has recovered to top 1,900 points. It closed at 1,947 Wednesday, up 0.7 percent from the previous trading day.
But the index has so far failed to bounce back to this year's high around the 2,200-mark, as virus concerns remain in most European countries and the United States.
Kang said the so-called “ant investors” are having a positive impact on the local stock market, as they helped inject more liquidity.
“Investors' deposits in the stock market surged by 20 trillion won, compared to earlier this year, on the inflow of new investors,” he said.
“This was also driven by prolonged low interest rates and investors' weakening craze for real estate markets here.”
Despite the rise of individual investors, they will not become a determining factor for the KOSPI's complete rebound, he said.