"I'm leaving once I break even." "Once I recover my principal, I'm cutting my losses and never looking at the Korean market again."
Posts like these flooded investor communities on brokerage mobile trading system (MTS) platforms. When the Kospi surged more than 17 percent on July 31 — its biggest single-day gain on record — retail investors responded not by buying in but by dumping domestic equity exchange-traded funds (ETFs) en masse, using the rebound as an exit opportunity after losing faith in the local market.
According to Koscom data, only three of the top 10 ETFs by net purchase among retail investors on July 31 were domestic products — all inverse ETFs: KODEX 200 Futures Inverse 2X, KODEX Inverse and KODEX Kosdaq 150 Futures Inverse. The remaining seven were all US equity ETFs. Domestic index-tracking and semiconductor ETFs failed to make the top net-purchase list.
Retail investors net-bought 371.5 billion won ($259 million) worth of KODEX 200 Futures Inverse 2X and 111.1 billion won worth of KODEX Inverse, signaling that many were betting on further declines even as the Kospi recovered from the 5,600 level to above 6,500 in a single session.
Excluding inverse ETFs, US equity ETFs swept the top net-purchase rankings. Retail investors net-bought TIGER US S&P 500 (42 billion won), KODEX US NASDAQ 100 (37.8 billion won), TIGER US NASDAQ 100 (24.4 billion won) and TIGER US Philadelphia Semiconductor NASDAQ (16.9 billion won).
Domestic equity ETFs dominated the top net-selling list. Single-stock leveraged ETFs in particular drew heavy profit-taking as they surged sharply.
Retail investors net-sold 587.9 billion won worth of KODEX SK Hynix Single-Stock Leverage, as the ETF soared 58 percent that day, drawing a concentrated wave of sell orders.
KODEX Leverage (494.2 billion won), KODEX 200 (276 billion won), KODEX Samsung Electronics Single-Stock Leverage (215.6 billion won) and TIGER SK Hynix Single-Stock Leverage (153.7 billion won) followed in net-selling volume.
Securities analysts say the dominant buyers in the domestic market are shifting. "Foreign investors' combined net purchases on Korea Exchange and Nextrade on July 31 totaled 8.77 trillion won — an all-time record — while retail investors net-sold 10.38 trillion won," said Kim Du-eon, a researcher at Hana Securities. "Whether foreign buying will continue remains to be seen, but what matters is that the sellers in the panic and the buyers in the rebound were different groups."
Yang Il-woo, a researcher at Samsung Securities, said retail ETF trading — which is counted under financial investment flows — has entered something of a lull, while pension funds began net-buying after the Kospi fell below the 6,000 level. He added that if net purchases by other corporations, absent for more than three months, resume on the back of share buybacks and similar activity, investor sentiment toward both Korean and US IT sectors could stabilize, potentially drawing foreign buyers back into the market.
Some analysts expect retail selling pressure to resurface at every rebound. "Given that retail investors concentrated their net purchases in the Kospi 7,000–8,500 range, consistent retail selling aimed at cutting losses and exiting the market could emerge as the index approaches the 7,000–8,000 level," said Kim Jae-seung, a researcher at Hyundai Motor Securities.
Han Ji-young, a researcher at Kiwoom Securities, also noted that roughly 130 trillion won is trapped above the 6,000-point level following the Kospi's cascading plunge, which could act as a potential overhang when the market rebounds. She added that shares that entered around the 8,000 level when the Kospi entered correction territory in late June were likely bargain-hunting buys during the selloff, making them prime candidates for exit selling once prices approach breakeven.
moon@heraldcorp.com
