Retail investors scale back US stock purchases, signaling return to domestic market

An electronic trading board at Hana Bank headquarters in central Seoul shows the benchmark KOSPI surpassing an unprecedented 4,500-point mark to close at 4,525.48 points, Tuesday. The New Year rally continued after previous record breaks at 4,300 points last Friday and 4,400 points on Monday. Yonhap

A retail investor holding U.S. stocks said in a recent online community post that he decided to sell his Microsoft shares, which fell 5 percent over the past six months — from $497.72 on July 7, 2025, to $472.85 as of Monday.

He said he is instead considering returning to the domestic stock market where he had invested for years, even before the U.S. stock boom driven by artificial intelligence (AI).

“I judged that not all U.S. stocks, including the ‘Magnificent 7,’ guarantee the high returns many newcomers to the U.S. stock market expect,” the user, going by the moniker “I’m heading out of the office now” wrote, referring to the seven dominant mega-cap tech companies — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.

“In particular, the tax relief and other recent benefits offered by the government convinced me to shift from New York to Seoul,” the investor added.

The case signals a potential comeback of Korean individual investors, although this remains debated, in response to the government’s aggressive efforts to stabilize the volatile currency market by repatriating dollars that have flowed abroad.

While Korean retail investors were net buyers of U.S. stocks for most of December, trading patterns reversed in the final week with net selling becoming pronounced.

According to the Korea Securities Depository, they net sold a combined $344.26 million worth of U.S. stocks from Dec. 23 to Dec. 25 last year and again on Dec. 30, a notable change given that cumulative net buying totaled $2.01 billion for the entire month.

The depository’s data on foreign stocks provides a clear view of individual investors’ overseas trading, as these transactions go through the depository.

Institutional investors, however, trade directly with foreign brokers and are therefore not reflected in the data.

“It may be too early to predict whether retail investors are returning to the domestic market, but this can be interpreted as a sign of a shift in investment sentiment,” said Jung Eui-jung, head of the Korean Stockholders’ Alliance.

He noted that the net-selling trend emerged in line with the government’s recent announcement on a package of incentives aimed at luring retail investors back to the domestic market.

Under the measures, investors are eligible for a temporary capital gains tax exemption of up to 50 million won ($34,600) for one year if they sell stocks held as of Dec. 23, 2025, and reinvest the proceeds in domestic stocks.

The earlier the reinvestment, the greater the benefit, with a 100 percent exemption for investments returning in the first quarter of 2026, 80 percent in the second quarter and 50 percent in the third quarter.

Another set of data from the depository showed that domestic investors’ purchases of the “Magnificent 7” fell 28.97 percent, from $5.15 billion in November to $3.66 billion in December.

“The decline may indicate that these investors are moving funds from New York to Seoul, though they could also be turning to smaller, still-profitable U.S. stocks,” an analyst said on condition of anonymity.