The buying of U.S. stocks by Korean retail investors trading U.S. stocks (domestic investors who invest in overseas stocks) has expanded sharply this year as well.

The Ministry of Economy and Finance on the 24th announces a domestic investment and foreign exchange stabilization tax support plan that temporarily exempts capital gains tax on foreign stocks (20%) if investors sell overseas shares and make long-term investments in domestic stocks. Photo shows an ad for U.S. stocks at a securities firm in Seoul on the 25th. /Courtesy of Yonhap News

According to the Korea Securities Depository (KSD) securities information portal, Seibro, on the 1st, as of the 28th, U.S. stock holdings this month stood at $174.4 billion (250.6825 trillion won). This is a record high.

U.S. stock holdings increased by $10.9 billion (15.696 trillion won) from the previous month ($163.5 billion). After first exceeding $170 billion in holdings in Oct. last year, the figure stayed in the low $160 billion range in Nov.–Dec., with buying momentum easing somewhat. This appears largely due to increased profit-taking at year-end for tax avoidance. On top of that, the won-dollar exchange rate climbed into the 1,480-won range, adding to the burden.

However, as buying of U.S. stocks picked up again at the start of the year, the scale of holdings also increased significantly. As of the 29th, net purchases of U.S. stocks in January were tallied at $5.1 billion (7.3241 trillion won). That is about 2.5 times the previous month's $1.9 billion (2.7285 trillion won).

Korean retail investors trading U.S. stocks were found to have net bought a broad mix of tech stocks, exchange-traded funds (ETFs) tracking major indexes, and commodities in January. The most net bought this month was Alphabet, with net purchases of $743.66 million. It was followed by Tesla ($505.33 million) and the leveraged ETF that tracks Tesla shares at twice the rate, "Direxion Daily TSLA Bull 2X Shares," at $311.16 million.

In addition, the "Vanguard S&P 500 ETF," which invests in the Standard & Poor's (S&P) 500 index ($305.17 million), Micron ($293.29 million), and the "iShares Silver Trust ETF," which invests in silver ($197.95 million), also ranked among the top net purchases.

The securities industry expects U.S. stocks to rise again. Researcher Kim Seong-hwan at Shinhan Investment & Securities said, "We judge that the share price uptrend is unlikely to be short-lived and is likely to unfold throughout the first half," adding, "We expect a re-entry into an upward trend starting with the earnings season in late Jan. to early Feb."

However, with the government set to launch in Feb. the domestic market return account (RIA), which offers tax benefits when investors sell overseas stocks and return to the domestic market, attention is also needed on potential moves to return to the market.

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