Retail investors pour $4.64B into US stocks in July, bet big on 3x semiconductor ETF

Korean retail investors' net purchases of US stocks surpassed $4.6 billion in July, reaching their highest level in six months, as a steep drop in global semiconductor shares drew a surge of bargain-hunting demand. The rebound reversed a net-selling trend that had taken hold in April and May following the introduction of a domestic market return account scheme.

According to the Korea Securities Depository's securities information portal SEIBro, Korean investors' net purchases of US stocks totaled $4.64 billion in July — the largest monthly figure this year outside of January, when net purchases reached $5.03 billion.

Retail investors' appetite for US stocks had been visibly cooling since the government introduced the domestic market return account, known by its Korean acronym RIA. The RIA product allows investors who sell overseas stocks acquired before Dec. 23 last year and reinvest the proceeds in domestic equities for one year to receive a capital gains tax deduction — 100 percent for those who returned by May 31, 80 percent through the end of July, and 50 percent through year-end.

After the accounts launched in earnest in March, net purchases fell to $1.69 billion. In April, the figure swung to net selling of $468.92 million. May — the final month to qualify for the full 100 percent deduction — saw net selling widen further to $939.77 million.

The tide turned in June, when the listing of SpaceX pushed the balance back into net-purchase territory at $632.95 million. July then brought an explosive rebound. Market observers attributed the shift to a weakening of the RIA's tax incentive, combined with a sharp correction in global semiconductor stocks that triggered a rush of dip-buying.

The Philadelphia Semiconductor Index fell 20.60 percent from the end of June to the end of July. Over the same period, the Kospi — where Samsung Electronics and SK hynix together account for more than 50 percent of the index — tumbled 22.19 percent.

Retail investors responded by loading up on semiconductor-related names in July. The top net-purchased stock was the Direxion Daily Semiconductors Bull 3X Shares ETF, widely known by its ticker SOXL, with net purchases of $3.79 billion. SOXL is an ETF that seeks to deliver three times the daily return of the Philadelphia Semiconductor Index.

SOXL alone accounted for more than 80 percent of total net purchases for the month, with rebound bets concentrated in a single sector — and a triple-leveraged one at that. SK hynix American depositary receipts ranked second at $843.7 million, followed by Alphabet Inc. Class A shares at $364.29 million.

On the domestic side, retail investor activity on the Kospi told a different story. Individual investors' net purchases on the Kospi — including ETFs, exchange-traded notes and equity-linked warrants — totaled 14.17 trillion won ($9.88 billion) in July, plunging 25.05 percent from 56.53 trillion won in June.

Even as overall domestic buying shrank sharply, the stocks retail investors favored mirrored their US choices: semiconductors. SK hynix led Kospi net purchases by individuals in July at 9.01 trillion won, followed by Samsung Electronics at 5.05 trillion won. The buying suggests that despite the sector's steep correction, investors still hold strong expectations for semiconductor growth.

"It is hard to find signs of a contraction in the semiconductor cycle," said Im Hye-yun, an analyst at Hanwha Investment & Securities. "Export prices for commodity DRAM and high-value, high-capacity memory chips rose from the previous month, and with demand holding up well, exports in the second half are likely to continue growing at around 150 percent year-on-year."

Jeong Yeo-gyeong, an analyst at NH Investment & Securities, said that big-tech earnings reports beginning in late July showed further expansion in capital expenditure this year — Alphabet up 8 percent, Meta up 4 percent and Amazon up 10 percent. "It is true that the magnitude of upward estimate revisions has narrowed compared with the past, but semiconductor export demand has expanded, which is a positive signal for Korea's semiconductor export outlook," she said.