The KOSPI is rebounding after a plunge, but individual investors remain wary. During last month's steep sell-off, many fled to U.S. stocks, but in the recent KOSPI rebound they have been concentrating on buying inverse products that bet on further declines. Rather than following the uptrend, they are putting more weight on the possibility of another pullback.
According to Koscom ETF Check on the 16th, the exchange-traded fund (ETF) most heavily net bought by individuals over the past week was "KODEX 200 Futures Inverse 2X," which tracks the daily return of the KOSPI200 futures index at -2 times, with net purchases reaching 132.8 billion won. Products that bet on declines also made up many of the top individual net buys, including KODEX Inverse (No. 3) and SOL SK hynix Single Stock Futures Inverse 2X (No. 9).
Individual investors are still seen as placing higher odds on a KOSPI decline. The KOSPI slid to the 5,300 level after a sharp correction last month, but with a rebound in August it is now on the verge of retaking the 7,000 level. In particular, with a roughly 10% rise over the past week boosting gains in a short span, individuals appear to be weighting the likelihood of a pullback over additional upside.
Previously, individuals shifted to U.S. stocks amid the KOSPI's plunge. Over the past month, the ETF most heavily net bought by individuals was "TIGER S&P 500" with 631 billion won of inflows. KODEX Nasdaq 100 (443.7 billion won) and KODEX S&P 500 (348.2 billion won) were also among the top net buys.
Some say individual flows have grown more short-term and reactive rather than following the uptrend. Lee Jae-won of Yuanta Securities Korea said, "Since July 31, on strong up days foreigners are net buyers and individuals are net sellers, while on plunge days foreigners are net sellers and individuals are net buyers, and this pattern is repeating," adding, "Individual flows are shifting from trend following to bargain-hunting on pullbacks and profit-taking on rebounds."
In the end, foreigners' flows are seen as the key variable for the KOSPI to sustain its uptrend. Lee added, "Individuals are unlikely to be the driver of index gains during a record-high rally," diagnosing that "for the KOSPI to extend its uptrend, what matters is not individuals adding more leverage, but foreigners consistently turning to net buying."
For foreigners to keep net buying, some analysts say it will take confidence that the upside pressure on U.S. market rates will ease and that artificial intelligence (AI) capital expenditures (CAPEX) can continue to expand. Because KOSPI volatility (VKOSPI) and foreign flows show a negative correlation, easing market volatility is also cited as a condition for foreign capital inflows.
In fact, foreigners are moving in the opposite direction to individuals. Over the past week, the second most heavily net bought ETF by foreign investors was KODEX Leverage, with 55.6 billion won of inflows. Products that bet on gains also ranked among the top net buys, including TIGER SK hynix Single Stock Leverage (28.6 billion won, No. 4) and TIGER Leverage (18.3 billion won, No. 7).