Retail investors flee Korean market as US stock purchases quadruple, deposits teeter near W100tr

Investor deposits — funds parked in brokerage accounts awaiting deployment in the domestic market — are barely holding above the 100 trillion won ($68.1 billion) mark, even as Korean retail investors rapidly step up purchases of US stocks.

As volatility in the domestic market intensifies, a clear shift of capital toward US equities and leveraged products has emerged, with net purchases of US stocks this month jumping to four times the level recorded in June.

According to the Korea Financial Investment Association and SEIBRO, the securities information portal of the Korea Securities Depository, investor deposits stood at 104.3 trillion won as of Thursday.

Investor deposits hit an all-time high of 139 trillion won on June 4 before gradually declining, falling to 103.88 trillion won on Wednesday — the lowest level in roughly five months since Feb. 13, when they stood at 99.27 trillion won. Deposits edged up slightly on Thursday but remain at risk of falling below the 100 trillion won threshold.

Meanwhile, Korean investors' net purchases of US stocks from July 1 through Thursday totaled $2.53 billion, roughly four times the $632.96 million recorded in June.

Korean retail investors' net purchases of US stocks reached $1.69 billion in March before swinging to net selling of $468.93 million in April. Net selling widened further to $939.77 million in May, but buying resumed in June and has expanded sharply this month.

Earlier, government policy, a rising Kospi and a high exchange rate had drawn retail investors back to the domestic market, but a sustained downturn has fueled speculation that they are once again pulling out.

By individual security, the top net purchase by settlement amount as of Thursday was the Direxion Daily Semiconductors Bull 3X Shares ETF — which tracks three times the daily return of the Philadelphia Semiconductor Index — at $1.5 billion.

SK Hynix American depositary receipts came in second at $613.67 million, followed by the Direxion Shares ETF Trust Daily MSCI South Korea Bull, which tracks three times the performance of the Korean stock market, at $213.37 million.

Funds are also flowing into ETFs listed on the domestic market that track major US indexes. According to Koscom ETF Check, three of the top five ETFs by net inflows over the past week tracked major US benchmarks such as the S&P 500 or the NASDAQ 100.

The TIGER US S&P500 ETF led all products with net inflows of 221.4 billion won, while the TIGER US NASDAQ 100 ETF and the KODEX US S&P500 ETF ranked third and fourth with inflows of 143.9 billion won and 139.2 billion won, respectively.