As tensions between the United States and Iran eased and the New York stock market continued its record high run, Korean retail investors trading U.S. stocks also returned to net buying. However, with the index's peak weighing on sentiment, there is no small number of investors betting on declines, leaving a tense standoff among investors over the market's direction.
According to the Korea Securities Depository (KSD) investment information portal SEIBro on the 27th, Korean retail investors trading U.S. stocks were net buyers of $129 million (about 189 billion won) in U.S. stocks in mid-April (the 13th–24th). This contrasts with the first week of April (the 1st–7th), when they were net sellers of $907 million (about 1.3372 trillion won).
This shift is seen as the result of the recent rebound in the U.S. stock market. The three major U.S. indexes all rose over the past month. The Standard & Poor's (S&P) 500 index climbed about 10%, the Nasdaq 100 rose 15%, and the Dow Jones Industrial Average gained 6%, extending a record high trend.
Although tensions between the United States and Iran continue, a de facto indefinite truce in broad terms has shifted the market's focus to expectations for artificial intelligence (AI) earnings. In particular, last week Intel posted an "earnings surprise," extending a rally in tech stocks centered on semiconductors.
Still, despite rising indexes, investors focused on the possibility of a correction in the semiconductor sector. Over the same period, the No. 1 net-buy item among Korean retail investors trading U.S. stocks was DIREXION SHARES ETF TRUST DAILY SEMICONDUCTOR BEAR 3X SHS (SOXS), which inversely tracks the semiconductor index by three times, with $172.14 million purchased.
This is interpreted as a bet on a potential pullback after a short-term surge in the semiconductor sector. From Apr. 13 to 24, Nvidia rose 10.4%, Micron 18%, SanDisk 16%, Microsoft 14.5%, Amazon 10.7%, and Alphabet 8.5%.
Some also say this reflects caution over rising interest rates. Kim Yong-jin, a professor of business administration at Sogang University, said, "As U.S. indexes continued to set record highs after the truce, investors appear to have bet on a correction," while adding, "If the Federal Open Market Committee (FOMC) turns hawkish depending on future inflation data, concerns that semiconductor corporations' funding expense could rise have been partly reflected."
In the securities industry, analysts see a high chance that the FOMC scheduled for Apr. 29 (local time) will hold rates steady, but they also say there is a strong possibility of a hawkish turn thereafter. For now, they are deferring a policy path decision due to uncertainty from the Middle East war, but warn that concerns over rising inflation expectations will be reflected.
Indeed, inflation expectations are resurfacing. According to LS Securities, 1-year inflation expectations jumped to 4.7%, up about 0.9 percentage point (p) from the prior month. Long-term inflation expectations also rose to 3.5%, putting price pressures back in the spotlight.
Still, there is a strong view that the index will rise led by semiconductors. The No. 2 net-buy item among Korean retail investors trading U.S. stocks was ROUNDHILL MEMORY ETF, No. 3 was Microsoft, No. 4 was Oracle, and No. 5 was SanDisk, revealing a clear divergence in investor views on direction.
This is interpreted as placing more weight on the possibility of rate cuts and gauging the market's upside potential. Lee Jae-man, a researcher at Hana Securities, said, "Beyond prices, labor, consumption, and dwellings—overall economic momentum—are also key variables," adding, "The Fed could move to cut the policy rate to fend off an economic slowdown."