It turned out that Korean retail investors trading U.S. stocks this month picked individual tech stocks and regular index exchange-traded funds (ETFs) instead of 3x leveraged products. High-risk leveraged products that swept the top net-buy rankings a month ago fell out of the monthly rankings for August.
However, analysts noted it is premature to conclude that the preference for high-risk investments has completely faded, as more than 2 trillion won flowed back into 3x semiconductor ETFs ahead of Nvidia's earnings on the 27th.
According to the Korea Securities Depository (KSD) on the 28th, the U.S. stock most heavily net bought by domestic investors this month was SpaceX at $390.7 million. Alphabet ranked second at $271.39 million, followed by Vanguard S&P 500 ETF ($196.78 million), Amazon ($189 million), and Invesco Nasdaq 100 ETF ($182.63 million).
The top ranks changed markedly from the previous month. In July, Direxion Daily Semiconductor Bull 3X Shares (SOXL), which tracks three times the daily return of the Philadelphia Semiconductor Index, took first place in net buys at $3.78586 billion. ProShares UltraPro QQQ, which tracks three times the return of the Nasdaq 100 Index, and the 3x MSCI Korea Index product KORU also placed fourth and fifth, respectively. At that time, three of the top five net buys were 3x leveraged products.
Previously, concerns were raised that after the regulation of single-stock leveraged products, demand could shift to unregulated overseas 3x index ETFs, creating a "second balloon effect." However, in August's monthly net-buy rankings, such a concentration in leveraged products did not continue.
Investment targets also diversified from the single semiconductor sector to the broader AI ecosystem, including cloud and platforms. As the second-quarter earnings season progressed, analysts said selective investing strengthened to identify companies that prove results with actual sales and profits rather than the sheer scale of AI investment.
Kang Jae-gu of Hana Securities said, "Market participants no longer view only the capital expenditures of cloud corporations and the top-line growth of related infrastructure companies positively," adding, "To justify high valuations, there is growing demand to see how quickly the capital deployed converts into revenue, profit, and cash flow."
He added, "Microsoft, Amazon, and Alphabet recently confirmed strong growth and improving profitability in their cloud businesses through earnings," explaining, "AI investment has entered a phase where it goes beyond a simple expense increase and leads to growth in sales and operating profit."
The zeal for U.S. stocks remains strong. As of the 26th, domestic investors' holdings of U.S. stocks stood at $186.6 billion, up from $163.6 billion a month earlier. The decline in the won-dollar exchange rate, which reduces the burden of currency exchange, could also support overseas investment, analysts said.
Park Sang-hyun, a researcher at iM Securities, said, "As domestic investors, fatigued by greater volatility in the local stock market, shift to U.S. stocks, the drop in the dollar-won exchange rate could further fuel this trend," adding, "Reduced currency-exchange burden will act as a catalyst to expand investment by Korean retail investors trading U.S. stocks."
However, the preference for high-risk products has not completely disappeared. In the week just before Nvidia's earnings, from the 20th to the 26th, domestic investors were the biggest buyers of U.S. stocks in SOXL, net buying $1.82703 billion (about 2.5092 trillion won). As of the 26th, domestic investors held about $6.47 billion of SOXL, equal to 30.8% of SOXL's total market capitalization of about $21 billion.
On a monthly basis, investment destinations broadened to individual big tech and regular ETFs, but ahead of events that could set the market's direction, such as Nvidia's earnings, money quickly flowed back into leveraged products. The investment targets merely diversified; it is premature to say that the investment disposition of Korean retail investors trading U.S. stocks, who seek short-term high returns, has changed.
A securities industry official said, "In August, investment destinations dispersed into individual tech stocks, but it is hard to say the risk appetite of Korean retail investors trading U.S. stocks itself has diminished," adding, "When market volatility increases or a clear catalyst for gains emerges, funds are still quickly shifting into high-risk products."