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Korean retail investors' offshore stock purchases hit record high in July

Aug 20, 2020 (Gmt+09:00)

South Korean individuals purchased a record amount of shares in overseas markets last month as they looked beyond the local bourse for bigger returns.

According to data from the Korea Securities Depository on August 20, retail investors bought a net 3.83 trillion won ($3.2 billion) worth of shares in foreign stock markets in July. That marks an all-time high for monthly purchases and surpassed their buying of local stocks worth a net 2.24 trillion won in the same month.

The strong appetite for foreign stocks boosted foreign-currency securities deposits to a record 69.72 trillion won as of August 18, up 33.2% from the end of 2019, data showed.

Korean individuals’ investment in offshore securities was mostly made in the US as 16 of top 20 foreign purchases were American companies.

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Tesla Inc. has been Korean retail investors' recent favorite foreign stock pick, with a total net purchase of 1.65 trillion won so far this year, followed by Apple Inc. (1.2 trillion won), Microsoft Corp. (773.8 billion), Alphabet Inc. (492.8 billion) and Hasbro Inc. (489.6 billion won). The five stocks accounted for 34.3% of retail investors’ purchase of offshore shares worth a total 13.45 trillion won since the start of the year.

Other favorites include US life science company Schrödinger Inc., Chinese foundry firm Semiconductor Manufacturing International Corp. (SMIC) and Japanese video games company Bandai Namco Holdings Inc.

Individuals turned their eyes overseas as local shares have underperformed their global peers.

While the US benchmark index, the Dow Jones Industrial Average, has risen 170% over a decade since August 20, 2010, the Nasdaq Composite index soared 412% in the same period. By contrast, the KOSPI index has gained slightly less than 30%.

More recently, some Korean investors sought out foreign shares for higher returns following a sudden surge in local stock markets in the past few months.

The country’s retail investors, known as Ants, have become the biggest buying force on the local bourses since early this year, betting heavily on a recovery from the coronavirus-driven slump.

Buoyed by a deep retracement since the local market’s yearly low in mid-March and acting on fears of missing out on further gains, Ants aggressively bought into local shares, while foreign investors and institutional investors dumped.

Analysts said aggressive marketing efforts by local brokerages also contributed to an increase in retail investors’ buying of foreign shares. as Korean securities firms offered incentives such as lower foreign exchange fees to their customers.

By Kyeong-je Han

In-Soo Nam edited this article

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