Net purchases in first week of November reach 2.98 trillion won

Surpass all of August, more than double September's total

Over 70% of purchases concentrated in 3x semiconductor ETF

A trader works on the floor of the New York Stock Exchange in New York on Oct. 16, ahead of the closing bell. [EPA]
A trader works on the floor of the New York Stock Exchange in New York on Oct. 16, ahead of the closing bell. [EPA]

As South Korea's stock market has tumbled in recent weeks, retail investors have been shifting their money into US equities at a rapid pace, snapping up nearly 3 trillion won ($2.24 billion) worth of American stocks in the first week of November alone. The buying has been heavily concentrated in leveraged products that track triple the daily return of a US semiconductor index.

According to data from the Korea Securities Depository's securities information portal SEIBRO, net purchases of US stocks by domestic retail investors totaled about 2.98 trillion won from Monday through Friday.

That single week surpassed the entire month of August, when net purchases came to $1.96 billion, and was more than double September's total of $1 billion. It also represents roughly 40 percent of October's full-month net purchase figure of $5.42 billion.

The trend marks a sharp reversal from the first half of this year. In April and May, retail investors were net sellers of US stocks — offloading $468.93 million and $939.77 million worth, respectively — partly in response to government policies aimed at drawing investment back into the domestic market.

Since June, however, they have returned to net buying and have consistently expanded their US stock purchases. October's monthly net purchase figure was the highest in 11 months.

Analysts attribute the surge in US stock investment largely to weakness in the domestic market. The Kospi failed to sustain its first-half gains and has been in a prolonged slump, with a sharp recent selloff pushing investors to look abroad.

The won-dollar exchange rate is also seen as a contributing factor. After briefly topping 1,500 won per dollar, the rate has since fallen back to the mid-1,300 won range, reducing the cost of buying dollar-denominated assets and improving conditions for overseas investment.

The single most popular US stock among retail investors this month was the Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL), a leveraged ETF that tracks triple the daily return of a semiconductor index. Net purchases of SOXL reached $1.63 billion, accounting for more than 70 percent of total US stock net purchases during the period.

Alphabet, the parent company of Google, attracted $497.05 million in net inflows. The ProShares UltraPro QQQ (TQQQ), which tracks triple the daily return of the NASDAQ 100 index, also saw net purchases of $220.22 million.

The concentration of buying in leveraged ETFs has drawn attention from market watchers. Leveraged ETFs multiply the daily return of an underlying index, offering amplified gains when markets rise but equally amplified losses when they fall. Experts warn that in periods of heightened volatility, losses can accumulate rapidly over a short period, and caution is warranted.

As overseas investment expands, idle funds in domestic brokerage accounts have been shrinking. According to the Korea Financial Investment Association, investor deposits stood at 88.53 trillion won as of Thursday — below 100 trillion won for nearly a month since Oct. 13.

The balance of margin loans used to buy stocks also remained in the 28 trillion won range, at 28.77 trillion won. Both investor deposits and margin loan balances, which typically rise alongside a bull market, have shown no meaningful increase during the recent downturn.

Even so, money continued to flow into domestic ETFs that bet on index gains. The ETF that attracted the most inflows in the domestic market from Monday through Friday was TIGER 200, which drew 200 billion won. KODEX Kosdaq150 Leverage and TIGER CD Rate Investment KIS (Synthetic) each received 144.4 billion won and 120.1 billion won, respectively.

Among individual retail investors, KODEX Kosdaq150 Leverage topped the net purchase rankings at 373.5 billion won, followed by KODEX Leverage at 342.4 billion won and KODEX 200 at 243 billion won.


boo@heraldcorp.com