Only Deposits of 50 Trillion... The 'Ant Power' Driving the V-Shaped Recovery Continues

Individual Investors Bought 36.5 Trillion KRW in KOSPI This Year
Individual Trading Volume Share Also 81.2% This Month
"Ants Expected to Drive Stock Market in Second Half"

On the 11th, when the KOSPI index surpassed the 2,400 mark for the first time in 2 years and 2 months, dealers were working in the Hana Bank dealing room in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Koh Hyung-kwang] How far can the power of the 'ants' grow? Since the crash caused by the COVID-19 pandemic, the proportion of individual investors in the domestic stock market has gradually expanded, leading the market. Despite large-scale sell-offs by foreign investors, the domestic stock market's V-shaped rebound continues, with the KOSPI index surpassing the 2400 mark for the first time in over two years and two months, driven by the massive capital mobilization power of the ants.

According to the Korea Exchange on the 11th, the proportion of foreign holdings relative to the market capitalization of the KOSPI market stood at 35.72% as of the previous day. At the beginning of the year, foreign investors accounted for 38.11% of the KOSPI market, but this has steadily declined to the mid-30% range. The gap left by departing foreigners has been filled by individual investors. Since the beginning of the year, individual investors have purchased stocks worth 36.5768 trillion KRW in the KOSPI market. This contrasts with foreign and institutional investors, who have net sold 24.1036 trillion KRW and 15.1618 trillion KRW, respectively.

The share of individual investors in the domestic stock market's trading volume is also on the rise. From the beginning of this month until the previous day, individual investors accounted for 149.87 trillion KRW of the total 184.37 trillion KRW trading volume across the domestic stock markets (KOSPI, KOSDAQ, KONEX), representing 81.2%. Monthly trading volume by individuals increased from 155.2 trillion KRW in January to 439.19 trillion KRW in the previous month. The proportion of individual trading volume in the total also surged by over 14 percentage points, from 65.3% in January to 80.0% in July. Not only has trading increased, but the net buying trend has been maintained. Individuals have continued a net buying trend in the KOSPI market for seven consecutive months since January. This month, they have net purchased about 2.3 trillion KRW up to the previous day.

Individual purchases have focused on large-cap and growth stocks. This month, the top two net purchased stocks by individuals were Samsung Electronics (7.263 billion KRW) and SK Hynix (5.023 billion KRW), the first and second largest by market capitalization on the KOSPI, totaling about 12 trillion KRW in net purchases. LG Chem, which recently rose to third place in market capitalization due to attention on secondary battery stocks, was also purchased for 3.574 billion KRW. Other top purchased stocks included Kakao (4.622 billion KRW), Seegene (1.25 billion KRW), Samsung Electronics Preferred (1.243 billion KRW), LG Chem Preferred (1.185 billion KRW), Samsung SDI (1.023 billion KRW), Chong Kun Dang (895 billion KRW), and Hyundai Motor (727 billion KRW).

The individual trading strategy has not changed significantly since the spread of COVID-19. In April, when individual investors net purchased 5.6 trillion KRW in the domestic stock market, they focused on stocks such as Samsung Electronics (4.367 billion KRW), Hyundai Motor (3.811 billion KRW), SK Hynix (3.376 billion KRW), Celltrion Healthcare (3.329 billion KRW), and Samsung Electronics Preferred (1.407 billion KRW). The main difference is that LG Chem, which was among the top net sold stocks at that time (-896 billion KRW), has recently been added to their buying basket. This month, individuals have purchased about 4.7 billion KRW combined in LG Chem and LG Chem Preferred shares. Supported by individual buying, LG Chem's stock price surged 33% this month alone, and Hyundai Motor, which individuals net purchased about 730 billion KRW this month, rose 35% during the same period.

Despite vigorous buying, individual investors' cash reserves waiting to enter the stock market have not decreased significantly. Investor deposits, which can be seen as potential investment funds, were below 30 trillion KRW until the end of February but exceeded 40 trillion KRW by the end of March and now approach 50 trillion KRW. The balance of credit loans, referring to money borrowed by individuals from securities firms for stock investment, surpassed 15 trillion KRW on the 7th, marking an all-time high.

In the securities industry, it is expected that the inflow of individual funds into the stock market will continue to expand in the second half of the year, driving the market. Kim Dae-jun, a researcher at Korea Investment & Securities, said, "This year, as foreigners and institutions have left, individual investors have become major players," adding, "With low expected returns on bonds and deposits and strong regulations on real estate, the trend of individual investors leading the stock market is expected to continue in the second half."