Korean retail investors trading U.S. stocks appear to have returned to large-scale buying of U.S. stocks from the first day of the new year.
According to the Korea Securities Depository (KSD) securities information portal SEIBro on the 4th, domestic investors' net purchase settlement amount of U.S. stocks was $504.36 million (about 730 billion won) on the 1st.
Korean retail investors trading U.S. stocks turned back to net buying at the start of the year after net selling $84.56 million, $91.65 million, and $145.43 million on the 25th, 30th, and 31st of last month, respectively. The one-day net buying on the 1st exceeded the combined net selling settlement over those three trading days ($321.62 million).
The Korea Securities Depository's foreign-currency securities deposit and settlement statistics are a key indicator for gauging individual investors' overseas stock trading trends. This is because major domestic institutional investors conduct transactions directly through overseas securities firms without going through the Korea Securities Depository.
The shift to net buying at the start of the year is attributed to the expiration of year-end tax-saving factors. Capital gains tax on overseas stocks is imposed based on sell orders settled by Dec. 31, leading to a tendency for profit-taking to concentrate at year-end.
A "breather" in the U.S. stock market also appears to have fueled buying sentiment. The three major New York indexes (Dow Jones, S&P 500, Nasdaq Composite), which had been hitting record highs, posted four straight days of losses through Dec. 31 last year (local time), but all edged up on the 2nd.
As individual overseas investment continues to expand, financial authorities tasked with stabilizing the exchange rate are expected to face a deeper challenge. On the 24th of last month, the Financial Services Commission cited the increase in individual overseas investment as one of the causes of the high won-dollar exchange rate and signaled the launch of the "return-to-domestic-market account (RIA)" and a retail deliverable forward-selling product.
Choi Gyu-ho, a researcher at Hanwha Investment & Securities, said in a report that day, "At the end of the third quarter last year, individuals' overseas stock holdings stood at about $160 billion (about 231 trillion won), and if policy brings roughly 10% back home, the won-dollar exchange rate could fall by about 55 won for the year."
However, "RIA will not be newly created until the end of the month, and with investors likely to wait and see at the start of the policy, it will be hard to expect policy effects from this month," adding, "In the end, relative returns matter more than tax benefits."