Korean retail investors pivot back to US stocks after brief sell-off

Korean retail investors — known colloquially as "seohak gaemi," or Western-market ants — posted net selling of foreign shares in the second quarter for the first time in 10 quarters, driven by a combination of a sharp domestic stock rally and government policy incentives.

According to the Bank of Korea on Monday, net investment in foreign equities by non-financial entities including retail investors came to net selling of $525.7 million in the second quarter's balance of payments. It was the first net selling by retail investors in foreign stocks since the fourth quarter of 2023, when they recorded net selling of $1.47 billion. Net selling means the value of shares sold exceeded the value of shares purchased.

Retail investors had maintained a net purchase streak in foreign equities throughout 2024 — $5.46 billion in the first quarter, $3.93 billion in the second, $228.6 million in the third and $742.9 million in the fourth. The trend accelerated sharply in the first quarter of 2025, reaching $11.18 billion, before easing to $2.22 billion in the second quarter. Net purchases then resumed in the third quarter ($3.27 billion) and fourth quarter ($14.69 billion), carrying into this year's first quarter at $9.91 billion.

On a monthly basis, non-financial entities recorded net selling of $424.9 million in April and $605.5 million in May this year, before swinging back to net purchases of $504.7 million in June.

Analysts attributed the April–May selling to a steep rise in domestic share prices during those months, compounded by government policies to revitalize the local market — including a domestic market return account, or RIA, that offers tax benefits to investors who sell foreign shares and bring the proceeds back into Korean stocks.

Data from the Korea Securities Depository showed retail investors had been buying US stocks steadily through the first quarter — $5 billion in January, $3.95 billion in February and $1.69 billion in March. The trend reversed in April, when they sold a net $468.9 million, and continued in May with net selling of $939.8 million, bringing the two-month total to $1.41 billion in net sales.

Buying resumed in June at $633 million, followed by $4.64 billion in July and $609.1 million through Friday this month, bringing the cumulative net purchase total to $5.88 billion.

Analysts say investors are turning their attention back to US markets amid rising volatility in domestic stocks.

The easing won-dollar exchange rate may also be a factor. The rate recently fell to the low 1,400-won range, reducing the currency conversion burden for those looking to invest abroad. The won-dollar rate closed the weekly session Friday at 1,416.1 won, down 7.7 won from the previous session. On Sunday, the rate briefly touched the 1,410-won level during trading for the first time in about 10 months, holding near that level for a second consecutive day.