"This Is Why I Said I Wouldn't Invest in the Korean Market"... Overseas Retail Investors Shake Their Heads at KOSPI Volatility [The World of Retail Investors]

[Financial News] #. O, a 45-year-old office worker who said he had invested only in U.S. stocks for more than two years, used to say, "This is why I don't invest in the Korean market." He said he had no intention of even looking at it, calling it a market where split listings and major shareholder risks, as well as foreign investors' tricks, leave only retail investors taking the hit.
But then KOSPI surged past 5,000 and kept climbing, with news reports saying it was even eyeing 9,000. Friends he traded stocks with kept posting screenshots of their returns, especially from semiconductor stocks such as Samsung Electronics and SK hynix. Praise poured in, with people saying, "This time is different. The semiconductor supercycle is real." In the end, O opened a domestic stock account this spring and bought a few names, including Samsung Electronics and SK hynix.

Amid this year's bull market, it is not hard to find individual investors like O who had stuck with the U.S. market but later returned to the Korean market. As KOSPI jumped from the 4,200 level at the start of the year to near 9,000, emerging as the world's best-performing stock market, analysts said interest among Korean individual investors investing in overseas stocks, who had focused on the U.S. market, was shifting back toward the Korean market.
In addition,RIA accounts, launched to encourage a return to the domestic market, also helped.An RIA account is a type of account that temporarily offers tax benefits on capital gains from overseas stocks if the proceeds from selling those stocks are converted into won and invested long term in the domestic market. Some also say investors who felt FOMO over the Korean market's rally may have been encouraged to return by the launch of RIA accounts.

In fact, while KOSPI was extending its rally, foreign stock purchases kept falling as money flowed into the domestic market. In April and May, when KOSPI's gains were especially strong, investors net sold $469 million and $939.77 million worth of U.S. stocks, respectively.
It is not possible to say that the people who sold overseas stocks and those who bought domestic stocks were the same, but it is worth noting that buying by individual investors in Korea stood out during the same period. In particular, money flowed into semiconductor-related bets, including single-stock leveraged exchange-traded funds (ETFs) that track twice the share-price gains of Samsung Electronics and SK hynix.
But KOSPI, which had been on a strong run, is now riding a roller coaster amid unprecedented volatility. So far this year alone, sidecars have been triggered 49 times in total, including 31 times on KOSPI and 16 times on KOSDAQ, while circuit breaker mechanisms have been activated eight times. On the 9th, the index opened at 7,486.64, up 239.85 points, or 3.31%, from the previous trading day, seemingly riding the bullish mood. But it then swung between declines and modest rebounds during the session before closing mixed.

Overseas retail investors who returned, seeing the Korean market as an opportunity, cannot help but feel drained as they face such extreme volatility. On top of that,they often end up in a "24-hour investment hell"as they try to keep up with both the U.S. and Korean markets at the same time. They lose sleep at night checking the U.S. market, then spend the day worn out by the Korean market's roller-coaster swings, creating a vicious cycle of doubled fatigue.
Given the situation, stock communities and other online forums are often filled with self-reproach, with comments such as, "I regret breaking my long-held conviction and opening a Korean market account." The chances that they will head back to the U.S. market have also risen amid the volatility in Korea's stock market. Overseas retail investors already turned net buyers again in June, purchasing $233.66 million worth of U.S. stocks, or 361.9 billion won, for the first time in three months, driven by the impact of SpaceX's listing, and their next move is drawing attention.

bng@fnnews.com Kim Hee-sun Reporter