The KOSPI index, which topped 9,000 points last month, has recently slipped to the 7,200 level, swinging sharply and putting the brakes on the flow of personal funds that had been heading en masse into the stock market since the start of the year. With investors' deposits and margin balances turning lower, even high-net-worth individuals are reducing their stock allocations, spreading a mood of reassessing investment strategies.
According to the Korea Exchange (KRX) and NEXTRADE (NXT) on the 13th, the average daily net purchase by retail investors in the main board from the 1st to the 10th was 1.494 trillion won, down 42.4% from 2.5956 trillion won last month. Investors' deposits stood at 107.1279 trillion won as of the previous day, down about 20 trillion won in a month, and margin balances fell to 36.6336 trillion won as of the 9th from 38.6328 trillion won on the 24th of last month.
Investors' deposits fell by about 11 trillion won in June, and they declined by around 13 trillion won this month as well, extending the downtrend. More notable is the buying by retail investors. Net purchases by individuals on the main board plunged 80.7%, from 54.5084 trillion won in June to 10.5384 trillion won this month.
Although the drop in deposits was similar, weakened sentiment reduced net stock buying, slowing the inflow of new money into the market.
◇ PBs: "People are buying stocks, but it's not like before"
High-net-worth individuals, who had been aggressively increasing their stock allocations, are also moving quickly to adjust strategies. ChosunBiz interviewed private bankers (PBs) at major securities firms including Mirae Asset Securities, NH Investment & Securities, KB Securities, Hana Securities, and Meritz Securities, and found the change in the flow of personal funds felt by front-line professionals is far clearer.
There are not many high-net-worth clients rushing to dump stocks just because the index has dropped recently, but compared with the first half of the year, more are delaying the timing of stock purchases or reviewing existing portfolios.
Kim Taeyeon, a PB at KB Securities' Gold & Wise The First Apgujeong Center, said, "Compared with May, the inflow of new funds slowed sharply from mid-June," adding, "In the past, consultations continued all day, but recently there has been a big drop in consultations for new investments."
Kim said, "In particular, clients who entered the stock market for the first time in May to June are voicing a lot of anxiety after experiencing big volatility even before making a profit," adding, "The most frequent questions are whether the semiconductor cycle is over and whether they should liquidate their holdings now."
Wealthy investors who increased stock weights relatively early are waiting for a rebound in the index, but with the market swinging sharply recently, the inflow of new money has effectively come to a halt, many front-line experts said. A KB Securities official said, "Most clients with unrealized gains are holding on and waiting for a rebound, but there is little new money coming in."
Lee Hyunjin, Director General of NH Investment & Securities' Premier Blue Samseong-dong Center, said, "High-net-worth clients who recently increased their stock weights are quite fatigued by the volatility," adding, "But nine out of 10 believe Samsung Electronics and SK hynix will eventually rise again, so the mood favors holding over selling."
Even so, they are busy looking for alternatives. Lee added, "We are seeing more inquiries about investment options that can reduce volatility, such as long-short funds, ELS, or pre-IPO."
◇ Common shares over leverage: how high-net-worth clients respond
Differences also appeared in how they respond to volatility. PBs agreed that high-net-worth clients prefer long-term investments centered on common shares rather than margin trading or single-stock leveraged ETFs.
PB Kim said, "Retail investors are more sensitive to volatility because they have higher weights in margin trading or leveraged ETFs, but high-net-worth clients rarely use margin," and Meritz Securities explained, "Given their strong long-term bent, most steadily accumulate common shares rather than single-stock leveraged ETFs."
The market outlook was not yet pessimistic. Lee Heegwon, head of Meritz Securities' Gwanghwamun Premier Center branch, said, "The most common recent question is whether to cut stocks now," adding, "But there is not yet a signal that the market has fully shifted into a bear phase."
He added, "We still see Samsung Electronics and SK hynix as long-term investment targets, and if volatility settles, there is a chance of a rotation into names that have fallen excessively."
PBs expect a wait-and-see stance to continue until the AI investment stance of U.S. big tech and the semiconductor cycle are confirmed. They agreed, however, that many investors are still waiting for opportunities rather than leaving the market.
Oh Jeongtaek, an executive director at Mirae Asset Securities' Investment Center Banpo WM, said, "The question clients ask most lately is, 'After semiconductors, where should we look?' adding, "Rather than being swayed by short-term volatility and trading repeatedly, it is important to build a portfolio with a long-term view, looking at sectors where the AI investment cycle can continue and even high-quality overseas assets."