Korea’s super-rich: How their wealth ballooned during the pandemic

In South Korea, just like any other major economies, the stock market has been a mine of gold even for small investors, who enjoyed hefty gains from stock purchases over the past year.

With limited options to spend due to curbs on travel and stay-at-home guidelines, a gush of fresh money found its way to the stock market, pushing up the Kospi index to a record level.

However, a deep dive into the investment patterns of the high net-worth individuals (HNWIs) or super-rich investors shows they have acted differently, making them even richer.

According to Mirae Asset Securities Co. on Wednesday, about 715,700 clients with more than 10 million won ($8,800) in deposits at the brokerage accounts produced an average return of 24.6% over the past year until the end of May.

Their holdings were not limited to local stocks but included other asset classes such as foreign stocks, funds, fixed-income investments and derivatives.

Of the clients, those investors with more than 10 billion won ($8.8 million) worth of assets in their accounts earned fatty returns of 48.9% over the past year. By comparison, less-wealthy investors’ rate of return was 23.8%.

HIGHER STOCK EXPOSURE

Data provided by the brokerage firm showed that as of May 2020, stocks accounted for 67% of the more wealthy investors’ portfolios, higher than 52% for those with investment value of 30 million-100 million won; and 59% for investors with 100 million-1 billion won assets.

That's contrary to the widely-held view that smaller investors are usually more aggressive with risky assets such as stocks for super gains.

The super-rich investors also amassed overseas stocks heavily during the COVID-19 pandemic era

The stock millionaires filled 13% of their asset portfolio with overseas stocks as of May 2020, much higher than about 5% for investors with less than 100 million won in stock investment.

Over the past year, the ultra-wealthy investors have further increased their exposure to stocks to 75% from 67%, while cutting down on their deposits in funds, bonds and derivative products.

Investors with 10 million-100 million won in investible assets increased their stock holdings to 60.4% from 48.6% during the same period.

With stock markets offering robust returns, outperforming other competing assets, an increasing number of affluent investors rushed to the brokerage houses to open new accounts.

The number of wealthier investors with assets over 10 billion won rose 82% as of May from a year ago, according to the Mirae Asset Securities data.

According to analysts, some investment actions that tell rich investors from less-wealthy investors include no hasty loss-cut sales and their aversion to short-term investment.

“The wealthiest investors view the market volatility as an opportunity to take advantage of lower market levels to purchase more equities,” said a Mirae Asset official.

“They know by experience that their increased exposure to stocks eventually ends up recovering their wealth far more quickly than those who had bailed out of the market.”

NO TESLA IN PORTFOLIO

One notable aspect of the Korean super-rich investors' overseas investment is that they haven’t purchased as many shares of Tesla Inc. as smaller investors have.

Stocks held the most by the wealthy Korean investors with over 10 billion won in investible assets were Microsoft, followed by Amazon.com, Jiangsu Hengrui Medicine Co., a Chinese pharmaceutical firm, Alphabet and Apple as of May 2020.

In May this year, their top pick among overseas stocks was Jiangsu Hengrui Medicine, followed by Amazon.com, Apple, Microsoft and Nvidia.

By comparison, smaller Korean investors held Tesla’s stock the most.

Among domestic stocks, SK IE Technology Co., Samsung Electronics Co., Samsung C&T Corp. and Hyundai Motor Co. were the rich investors’ favorites.

“The super-rich investors are long-term investors by nature. And their investment is focused on companies with innovation and growth potential,” said Jang Sung-joo, head of Mirae Asset’s Center 1 branch.

Write to Jae-Won Park at wonderful@hankyung.com
In-Soo Nam edited this article.