As South Korea's domestic stock market declines, individual investors in the country are increasing their purchases of U.S. stocks. In just five trading days, the net purchase amount of U.S. stocks approached 3 trillion Korean won, exceeding the total for the entire month of August.
Data from the Korean Depository and Clearing Corporation's securities information platform SEIBro on the 7th shows that from the 2nd to the 6th, Korean retail investors bought a net amount of $2.19753 billion in U.S. stocks, which is approximately 2.982 trillion Korean won.
This figure is higher than the net purchase amount of $1.96234 billion for the entire month of August, and it is more than twice the $1.00128 billion in September, which is approximately 40% of the total amount of $5.42312 billion from the previous month. In other words, the amount of U.S. stocks purchased by investors in just five trading days is close to the volume of a whole month in the past.
In April and May, Korean retail investors were net sellers in the U.S. stock market, selling $468.93 million and $939.77 million respectively. Part of the reason was that the South Korean government introduced policies to guide funds back to the domestic market. Starting from June, retail investors turned into net buyers and continued to increase their purchases. Last month, they recorded the highest net buying volume in 11 months.
During these same five trading days, retail investors made a net purchase of 4.2 trillion Korean won worth of stocks on the main board of the Korea Composite Index ( KOSPI ). The gap between the purchase volumes of local stocks and US stocks significantly narrowed, almost reaching parity.
This change in the flow of funds stems from the South Korean stock market's failure to continue its upward trend from the first half of the year, with a recent significant correction. At the same time, the exchange rate of the won against the US dollar has fallen from the 1500 won range to the mid-1300 won range. As the won strengthens, the cost of converting assets into US dollars has correspondingly decreased.
In the U.S. stock market, buying orders are highly concentrated on Direxion, which has a daily bullish expectation of 3 times that of ETF ( SOXL ). This ETF tracks three times the daily return of the semiconductor index. From the 2nd to the 6th, there was a net purchase of $1.62525 billion in this ETF, accounting for over 70% of the total net purchases in the U.S. stock market.
Retail investors also made a net purchase of $497.05 million in shares of Google's parent company, Alphabet; ProShares UltraPro QQQ (which tracks triple the returns of the NASDAQ 100 index) saw a net purchase of $220.22 million.
Funds continue to flow into U.S. stocks, also taking away reserved funds for local investments. Data from the Korea Financial Investment Association shows that as of the 5th, the balance of margin deposits by brokerage investors was 88.5338 trillion Korean won, and since last November 13th, it has remained below 100 trillion Korean won for nearly a month; the financing balance has been maintained around 28 trillion Korean won, at 28.7715 trillion Korean won.
