Retail investors suffer poor returns in US market after KOSPI exodus

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Retail investors who increased their holdings of U.S. stocks as an alternative to a bleak short-term outlook for the main bourse KOSPI are suffering losses due to high volatility in prices, market watchers said Friday.

Many left for the U.S. market, frustrated by the recent tax law revision in Korea, including a return to stricter rules on capital gains taxes for “large shareholders.” The revision expands the scope of the definition to include investors holding 1 billion won or more in a single stock. Previously, the threshold was 5 billion won or more, eased during the former Yoon Suk Yeol administration.

According to Korea Securities Depository, retail investors in Korean bought over $343.3 million (476 billion won) worth of U.S. stocks from Aug. 1 to 6. This was almost half the monthly total purchase of over $684.9 million in July.

The U.S. stock market continues to hit new record highs. The S&P 500 index reached 6,427.02 on July 31 (local time) but has since been taking a breather for the past four days.

The most popular U.S. stock purchased by retail investors in July was Bitmine Emergence Technologies.

Their net purchases were over $241.6 million in July. The firm, newly listed on the New York Stock Exchange in June, soared as the largest holder of cryptocurrency Ethereum in the world.

The rally was also driven by tech billionaire Peter Thiel holding a 9.1 percent stake in the crypto mining and services company.

The stock surged by around 3,900 percent within a month after its initial public offering, but has since tanked, dropping to a quarter of its peak.

Another popular stock was Figma, a design and product development platform, which was the most purchased stock by Korean investors.

They net bought around $10.37 million from Aug. 1 to Aug 6. The stock surged over 250 percent on the day of listing July 31, fueled by optimism over artificial intelligence (AI) tools. However, the prices have nearly halved since due to sell-offs led by overvaluation concerns.

“Newly listed stocks, including crypto- and AI- themed ones, undergo wild fluctuations, prompted by investors cashing out early,” an industry official said.

“The price drop can also be explained by concerns over overvaluation compared to company fundamentals or negative news and policy implications. Blindly increasing holdings in these stocks could lead to heavy losses.”

Optimism about the U.S. market continues. Analysts say large-cap stocks will see a rebound.

Hanwha Investment & Securities report said the U.S. may gain the upper hand in tariff negotiations, translating into renewed strength for the dollar.

“A strong dollar and a strong U.S. stock market will make U.S. AI and semiconductor stocks more attractive,” the report said.