Retail investors lose faith in Korean stocks, turn to US market

Korean retail investors have shifted from domestic equities to U.S. stocks in the second half as the two markets have taken divergent paths, market analysts said Monday.

While the KOSPI has fallen nearly 30 percent from its peak and struggled to regain momentum, enthusiasm for artificial intelligence (AI) has pushed Wall Street to a series of record highs.

According to data from the Korea Exchange and Korea Securities Depository, individuals sold a net 5.59 trillion won ($4.2 billion) worth of shares on Korea’s main bourse during the July-September period. Net purchases of 5.37 trillion won in July and 3.24 trillion won in August were outweighed by net sales of 14.2 trillion won in September alone.

Korean retail investors’ appetite for U.S. equities, meanwhile, remained strong throughout the third quarter. They made net purchases of $7.63 billion, equivalent to about 10.15 trillion won, over the three months. September’s heavy selling in Korea coincided with net buying of about $1 billion in U.S. stocks.

That pattern stands in stark contrast to their investment activity in the first half.

Between January and June, Korean individual investors poured a net 99.17 trillion won into shares on the KOSPI. The amount was about 7.5 times the $9.87 billion, or 13.22 trillion won, they invested on a net basis in U.S. equities during the same period.

In April and May, in particular, these investors pulled money out of U.S. stocks as government policies encouraged a return to the domestic market. They sold a net $468.93 million, or 628.3 billion won, in April and $939.77 million, or 1.26 trillion won, in May.

Retail investors’ renewed interest in U.S. stocks in the second half appears to reflect the prolonged lack of momentum in the Korean market.

The KOSPI has lost ground since posting an all-time closing high of 9,114.55 on June 22. It fell below the 7,000 mark on July 13, closing at 6,806.93, and has since remained rangebound with little momentum.

Meanwhile, optimism surrounding AI has sustained gains in all three major U.S. stock indexes, pushing them to fresh records.

Currency movements have added to the appeal of U.S. shares. After trading above 1,500 won per dollar in the first half, the Korean won has strengthened to the mid-1,300 range per dollar. The won’s appreciation means Korean investors need less of their home currency to purchase dollar-denominated stocks.

Kim Jong-min, a senior researcher at Samsung Securities, said persistently high interest rates were channeling global capital into a narrower range of assets.

“Investment is gravitating toward the AI value chain, where rapid growth offers resilience against high borrowing costs,” Kim said. “The relative strength of developed markets over emerging markets, combined with Taiwan’s outperformance of Korea among emerging markets, is further directing money toward U.S. AI-related businesses.”

Korean retail investors were joining that shift, using the stronger won as an opportunity to expand their exposure to the U.S. market, he added.