[Real Investment] Apple, Tesla, MS Grabbed... Wonjeong Ants' 63 Trillion Payments

Record High Overseas Stock Direct Purchases Triggered by COVID-19

Surpassing last year's transaction volume in just five months... This year could exceed $100 billion

U.S. stocks account for 86% of total overseas transactions... 4.3 times that of the same period last year

Top 10 net purchase overseas stocks up 30% from this year's record lows, showing 'attractiveness'

Delayed information and time differences make quick responses difficult... Investments should be made cautiously

[Asia Economy Reporter Ko Hyung-kwang] Already 63 trillion won this year. The amount of overseas stocks bought and sold by domestic investors has reached an all-time high. In just over five months, it has already far exceeded last year's total transaction volume of 50 trillion won. Experts analyze that this is due to investors turning their attention overseas and actively purchasing global stocks, judging that overseas stocks offer better returns than Korean stocks amid the volatility caused by the COVID-19 pandemic. The stock investment craze of domestic individual investors, known as 'Donghak Ants,' is spreading overseas across the seas.

According to the Korea Securities Depository on the 3rd, the total overseas stock settlement amount (purchase + sale) by domestic investors from the beginning of this year until the 29th of last month was $52.26083 billion (approximately 63.758 trillion won). This far exceeds last year's total overseas stock settlement amount ($40.98539 billion, about 50 trillion won). Overseas stock trading has surged so rapidly that it surpassed last year's transaction volume in just over five months. If this trend continues, it is expected that this year could exceed $100 billion.

Overseas stock settlement amount, which was only $3.1 billion in 2011, first exceeded $10 billion in 2015 ($13.9 billion). It slightly slowed to $12.6 billion in 2016 but then grew steadily with $22.7 billion in 2017, $32.5 billion in 2018, and $40.9 billion in 2019, increasing by about $10 billion each year. This year, due to the sharp decline in major global stock markets including the U.S. caused by the spread of COVID-19, individual investors aiming for bottom-fishing opportunities have massively entered the stock market, leading to an expected outstanding growth compared to the previous year.

◆ Which regions and stocks were bought? = Investors who purchased overseas stocks focused on the United States. Overseas investors bought and sold a total of $45.3 billion in U.S. stocks from the beginning of this year to May, accounting for 86.6% of the total overseas stock transaction volume this year. Compared to the same period last year ($10.4 billion), this is a 4.3-fold (333.3%) increase. During the same period, transactions in Chinese stocks increased by 66.3%, from $818.26 million to $1.36121 billion; Japanese stocks rose by 59.4%, from $899.24 million to $1.27441 billion. Hong Kong increased by 52.4%, from $2.38472 billion last year to $3.63562 billion this year, and the Euro market grew by 37.7%, from $155.02 million to $213.57 million.

The stocks most frequently traded by investors were also mostly listed on the U.S. stock market. Among the top 50 traded stocks, 92% (46 stocks) are companies listed on U.S. exchanges. The remaining four stocks are listed in Hong Kong. The top-ranked stock was Tesla, the American electric vehicle company, with $2.869 billion worth of transactions from the beginning of this year until the end of last month. Next were Microsoft ($2.139 billion) and Amazon ($2.044 billion), both benefiting from the untact (contactless) sector, ranking second and third respectively. Not only individual company stocks but also exchange-traded funds (ETFs) tracking indices attracted high investor interest. The 'ProShares UltraPro QQQ,' which seeks triple the return of the Nasdaq index, ranked fourth with $1.887 billion in transactions, and the 'ProShares UltraPro Short QQQ,' which seeks triple inverse returns of the Nasdaq index, ranked sixth with $1.199 billion. Apple, with $1.874 billion in transactions, ranked fifth, positioned between these ETFs.

In terms of net purchases, Apple led with $439.76 million. Next was U.S. toy company Hasbro ($386.04 million), surprisingly ranking second ahead of other major tech stocks. This likely reflects expectations of increased toy demand due to restrictions on outdoor activities amid the COVID-19 pandemic. Microsoft ($341.84 million), Alphabet ($315.03 million), and Tesla ($238.74 million) followed in third to fifth place, all U.S. stocks. Among the top 10 net purchases, companies listed in Hong Kong and Japan were also included. Alibaba Group Holding (ALIBABA GROUP HOLDING ORD SHS), listed in Hong Kong, ranked sixth with $149.44 million, and Japanese chemical company Showa Denko (SHOWA DENKO) ranked ninth with $138.89 million.

◆ "Korean stock market is narrow," seeking opportunities overseas = The reason domestic investors have massively purchased overseas stocks, especially U.S. stocks, is due to returns and growth potential. After the U.S. stock market, which soared last year, plunged due to the COVID-19 impact, investors judged it as a buying opportunity at low prices and bought heavily. Apple's stock price rose more than 80% last year alone, and many top U.S. market capitalization stocks such as Microsoft (56%), Alibaba (55%), and Facebook (51%) achieved returns exceeding 50%. In contrast, except for Samsung Electronics (44%), SK Hynix (55%), and Naver (58%), most top market capitalization stocks in Korea showed sluggish price movements last year.

Investors observing this aggressively purchased growth stocks as the U.S. stock market plunged due to COVID-19. Hwang Seung-taek, a researcher at Hana Financial Investment, said, "As the fear in the U.S. stock market, which plummeted due to COVID-19, somewhat subsided and showed signs of rebound, domestic investors looking for buying opportunities appear to be aggressively purchasing U.S. stocks." He added, "Since the Korean stock market accounts for only about 2% of the global market capitalization, investing in overseas markets seems to be viewed as a chance to find greater profits." He further noted, "The top 10 net purchased overseas stocks have risen nearly 30% on average from their record lows this year, while the top 10 net purchased domestic stocks have not even reached a 20% increase."

There is also analysis that the presence of many untact (contactless) beneficiary stocks in the U.S. stock market, highlighted by COVID-19, has fueled investment appetite. Kim Jin-young, a researcher at Kiwoom Securities, said, "It seems investors judged that investing in U.S. stocks, which have shown growth potential and higher returns compared to Korean stocks stuck in a box range for years, is better." He added, "As market volatility increases, investment tends to concentrate on large-cap and blue-chip stocks, and U.S. companies are indeed more attractive in terms of scale and industry."

◆ Avoid vague expectations = However, experts unanimously advise against investing in overseas stocks based solely on vague expectations. Overseas companies' related investment information is often reported later domestically, and time differences can make immediate responses difficult.

It is also necessary to approach more cautiously considering rapidly changing exchange rates and risks. Since the COVID-19 situation is not yet fully resolved and there is a possibility of renewed U.S.-China trade disputes, volatility can increase at any time. In particular, there is concern as cases of young people in their 20s and 30s, who have experienced losses in cryptocurrency investments like Bitcoin, are increasingly investing large sums hoping for quick gains.

Professor Kim Young-ik of Sogang University Graduate School of Economics, who was renowned as a 'sharp economist' in the securities industry, expressed concern, saying, "Investing in overseas stocks carries enormous risks. Individuals find it difficult to hedge risks, face significant exchange rate risks, lack knowledge about overseas policies and systems, and have insufficient understanding of foreign political and economic situations, making agile responses difficult." He advised, "Individual investors should always keep in mind that overseas investments are riskier than domestic ones. It is advisable to set personal standards, such as limiting overseas investments to about 10-20% of their assets, before investing."