As the KOSPI recovered the 7,000 level, concerns are growing that a decline in customer deposits means individual investors have less dry powder. But brokerages said it is too early to judge retail flows as deteriorating based solely on the drop in deposits, adding it was instead the result of active bargain hunting during the pullback.
Kim Jae-seung of Hyundai Motor Securities said in a report on the 16th, "A decrease in customer deposits can mean reduced capacity for additional buying, but it is premature to interpret this as a sign of individual investors exiting the domestic market and worsening sentiment."
With the pace of the decline in customer deposits accelerating recently, some have raised concerns that the trend resembles the "Donghak Ant Movement" in 2021. In fact, customer deposits started to fall in May of that year ahead of the KOSPI peak on July 6, 2021, and the recent speed of decline is assessed to be even steeper than then.
However, Hyundai Motor Securities said investor sentiment among individuals should not be judged by deposits alone. It noted that when also looking at net purchases of single stocks and domestic equity exchange-traded funds (ETFs), individuals are actually expanding the scale of their investment in the domestic market.
In fact, since the end of June, customer deposits have fallen by about 21 trillion won, but individuals were net buyers of 27 trillion won in domestic single stocks and 8.8 trillion won in domestic equity ETFs over the same period.
Kim said, "Rather than indicating an exit by individual investors from the domestic market, the decline in customer deposits should be interpreted as investment funds being deployed into buy-the-dip strategies during the downturn that began at the end of June."
One change seen in this bull run is the expansion of ETF investing.
During the 2021 Donghak Ant Movement, individual buying was concentrated in single stocks. In contrast, in this bull market, inflows into domestic equity ETFs have surged, and particularly since the launch of single-stock leveraged ETFs on May 27, individual funds have concentrated in related products during pullbacks.
Still, the securities industry noted that because individuals' buying capacity has somewhat decreased, selling pressure could intensify if the market rebounds.
Kim said, "Given that individual investor buying was concentrated in the KOSPI 7,000–8,500 range, we should focus more on the possibility of selling into rebounds ahead rather than on reduced buying power."
Kim explained that individual investors typically "sell when prices rise and buy when they fall." Kim added, "For customer deposits to flow back and individual buying to pick up again, market volatility needs to ease and expectations for expanded AI investment need to rise again so that sentiment can recover, led by the semiconductor sector."
Kim emphasized, "The decline in customer deposits is only a result, not a cause."