As the KOSPI slid to the 6,500 level recently and extreme volatility persisted, funds from individual investors are heading back to the U.S. stock market. Investor deposits, which serve as dry powder in the stock market, fell by about 800 billion won this month, while the net purchases of U.S. stocks more than tripled in a month. Buying that had focused on large-cap tech and index ETFs at the start of the year has lately spread to AI Semiconductor names and high-risk leveraged ETFs, signaling a shift in investment targets.
According to Korea Securities Depository (KSD)'s Seibro securities information portal on the 22nd, the net purchases of U.S. stocks by domestic investors from the 1st to the 21st of this month totaled $2,878.76 million (about 4.2605 trillion won). That exceeds four times last month's net purchases ($632.95 million). About $1 billion increased in just two days, from the 20th to the 21st.
Since the start of the year, net purchases of U.S. stocks fell from $4,498.63 million in January to $3,949.05 million in February and $1,691.50 million in March, then turned to net selling in April–May. However, after returning to net buying in June, buying has expanded sharply this month.
The volatility of the domestic stock market is cited as the backdrop for the "escape from the Korean stock market." Since mid-June, concerns about a peak-out in the semiconductor cycle combined with Middle East geopolitical risks, and the share prices of Samsung Electronics and SK hynix plunged more than 30% from their peaks. As the combined market cap weight of the two stocks accounts for about 30% of the entire KOSPI, analysts say the weakness in semiconductor stocks amplified volatility across the index.
The actual outflow of funds is also visible in the numbers. According to the Korea Financial Investment Association, investor deposits fell from 120.0837 trillion won on the 1st of this month to 112.5190 trillion won on the 20th, a drop of about 8 trillion won. As dry powder in the domestic market shrank, funds moved into U.S. stocks.
The exchange rate also stirred the sentiment of Korean retail investors trading U.S. stocks. The won-dollar rate shot up to 1,560 won early this month and has recently fallen to the 1,470-won range. As the rate, which had been above the 1,500-won level, declined, more investors moved to buy dollars, which in turn revived demand for U.S. stock investing, according to analysis.
Min Kyung-won, an economist at Woori Bank, said, "Companies that import commodities and other goods tend to secure dollars in advance for future payments when the exchange rate declines," and added, "Given that many maintained a strategy of buying even in the high-1,500-won range, there is a high likelihood that dollar accumulation demand will continue at current levels."
Min added, "Since domestic investors must exchange won for dollars to buy overseas stocks, the recent rebound in the share of U.S. stock investing is also underpinning dollar demand."
Funds also flocked to U.S. benchmark index exchange-traded funds (ETFs) listed in Korea. According to Koscom's ETF CHECK, from the 15th to the 21st, individual investors bought 119.3 billion won of TIGER U.S. S&P 500, and they also snapped up KODEX U.S. Nasdaq 100 (94.4 billion won), KODEX U.S. S&P 500 (71.2 billion won), and TIGER U.S. Nasdaq 100 (64.8 billion won).
Risk appetite is also turning more aggressive. The top net buy by Korean retail investors trading U.S. stocks this month was "Direxion Daily Semiconductors Bull 3X (SOXL)," a leveraged ETF that triples the Philadelphia Semiconductor Index. SK hynix American depository receipts (ADR) also ranked second, with nearly 900 billion won in net purchases just six days after listing.
This is different from the start of the year. In January, large-cap blue chips such as Alphabet, Tesla, and Vanguard S&P 500 ETF (VOO) led, but lately AI Semiconductor and leveraged products such as SOXL, SK hynix ADR, QLD, and Applied Materials have dominated the net-buy rankings. After the sharp drop in the domestic market, investors aiming for a rebound appear to have begun actively adding higher-volatility products.
In the securities industry, there is a view that inflows into SK hynix ADRs could also affect the supply-demand dynamics of the underlying domestic shares. As ADR trading becomes more active, demand may arise to trade the domestically listed stock in tandem for arbitrage and hedging transactions. In the United States, single-stock leveraged and inverse ETFs based on SK hynix ADRs are already being launched one after another.
Han Su-jin, a researcher at Samsung Securities, said, "Right after the SK hynix ADR listing, U.S. ETF managers are rolling out related single-stock leveraged and inverse ETFs in succession," and analyzed, "In the United States, where there are no price limits, volatility could expand more than in Korea."