As buying by domestic investors for the U.S. stock market has eased, Korean retail investors trading U.S. stocks are changing their semiconductor strategies. While dumping individual semiconductor stocks such as Micron, SanDisk and Marvell Technology, they placed more than $400 million in bets on SOXL, an exchange-traded fund (ETF) that triples the daily return of a semiconductor index.
On the 6th, according to Sebro, the securities information portal of the Korea Securities Depository (KSD), Korean retail investors trading U.S. stocks made net sales of more than $100 million in Micron from the 1st to the 4th. They also made net sales of $68.61 million in SanDisk and $49.37 million in Marvell Technology. They sold $15.56 million worth of Nvidia and $46.16 million worth of SK hynix ADR, respectively.
By contrast, they made net purchases of $430.95 million in SOXL over the same period. SOXL is a leveraged ETF that triple-tracks the daily return of the U.S. Philadelphia Semiconductor Index. As of late Aug., Korean retail investors trading U.S. stocks held $5.23172 billion worth of SOXL.
Despite the recent rebound in U.S. stocks, overall buying by domestic investors has actually slowed. As of Sept. 3, domestic investors' holdings of U.S. stocks stood at $190.8 billion, up more than $15 billion from a month earlier, but the increase was largely due to valuation gains from rising share prices. Net purchases of U.S. stocks in Aug. were $1.96 billion, more than halving from $4.64 billion in July.
Meanwhile, approaches to semiconductor investing are diverging between individual names and the sector as a whole. As semiconductor corporations' share prices have surged and concerns grow about a "peak-out" at the earnings top, investors are taking profits on individual stocks while maintaining bets on the long-term growth of artificial intelligence (AI) and the semiconductor cycle.
In particular, investing through SOXL leans more toward betting on the direction of the entire semiconductor industry than on individual corporations' results or competitiveness. Even with the recent price correction, expectations continue for expanded AI investment and an improving memory market, suggesting a strategy of using a leveraged ETF to navigate short-term volatility without missing potential upside.
However, because leveraged ETFs track multiples of a benchmark index's daily return, losses can grow in highly volatile markets. With the possibility of greater market volatility due to rising long-term U.S. yields and uncertainty over the Federal Reserve's monetary policy, observers said judging short-term share price direction is crucial.
Separately, Korean retail investors trading U.S. stocks made net purchases of $94.92 million in SGOV, a short-term U.S. Treasury ETF, in Sept., and also bought $47.28 million of IonQ, a quantum computer corporation. They made net purchases of $39.88 million in JEPQ, a monthly-distribution ETF, and $36.65 million in Merck, a U.S. pharmaceutical company.