Tech Stocks Leading Nasdaq Rally Plunge Sharply
Domestic Investors Focused on Apple, Amazon, Facebook Face Loss Concerns
Experts Say "Increased Volatility in US Tech Stocks"
[Asia Economy Reporter Song Hwajeong] "A 21% plunge overnight? I have no idea what to do; my mind is blank."
Domestic individual investors who invested in Tesla have fallen into panic. Tesla's market capitalization evaporated by as much as $55 billion (65.5 trillion KRW) after plummeting more than 20% in a single day on the U.S. stock market. As other Nasdaq tech stocks also faced deep corrections, 'Seohak Ants'?Korean investors investing in overseas stocks?are growing increasingly anxious.
On the 8th (local time), the Nasdaq index closed at 10,847.69, down 4.11% (465.44 points). The Nasdaq has plunged sharply for three consecutive days, falling more than 10% over this period. The Nasdaq had surpassed the 12,000 mark for the first time ever on the 2nd but soon declined, even falling below 11,000. Tech stocks, which had led the Nasdaq's record-high streak, dropped sharply, dragging the index down. On that day, Tesla fell 21%, marking its largest drop since listing. Apple dropped 6.7%, while Amazon and Facebook also fell more than 4% each.
The problem is that domestic investors have concentrated their net purchases on these stocks, raising concerns about losses. According to the Korea Securities Depository, domestic investors have been net buyers of Tesla by $489.3 million through the 7th of this month, making it the most purchased stock. Apple ($250.91 million), Nvidia ($157.26 million), Amazon ($128.8 million), and Facebook ($26.01 million) followed.
In particular, domestic individual investors' affection for Tesla was remarkable. Since July, domestic investors have net purchased Tesla shares worth $1.56424 billion, far exceeding the total net purchase of Tesla in the first half of the year ($470.11 million). Tesla's net purchase amount peaked at $761.49 million in July, dipped temporarily in August ($313.98 million), but has already reached nearly $490 million this month. It is interpreted that individuals took Tesla's stock split and recent price drop as a buying opportunity at a low price.
Tesla's stock plunge is partly due to negative factors such as failing to be included in the S&P 500 index and the investment agreement between competitor Nikola and General Motors (GM), but it is also evaluated that the Nasdaq index, centered on tech stocks, has entered a correction phase. Some raise concerns that the sharp decline in IT companies' stock prices, including Tesla and Apple, might be reminiscent of the early 2000s 'dot-com bubble.'
As volatility in U.S. tech stocks is expected to increase, many advise caution in investing. KB Securities researcher Lee Euntaek said, "The decline in tech growth stocks cannot be controlled by interest rates or inflation; rather, events like now often cause the drop," adding, "There are still end-of-month risk factors, and the strengthening of major shareholder tax requirements will be concluded only in early October, with the gap still wide, so the decline may continue a bit longer." He added, "However, from mid-October, the vaccine schedule will become clearer, betting on the U.S. presidential election results will intensify, and the overheating of tech growth stocks will be somewhat adjusted."
Despite this, as the domestic stock market's upward momentum slows somewhat, it is expected that more investors will turn their eyes overseas. NH Investment & Securities researcher Noh Donggil said, "One reason individual investors showed large-scale net stock purchases this year was the relatively high expected returns in the stock market," and predicted, "The inflow speed of domestic individual funds is expected to slow due to declining expected returns, and domestic investors will accelerate overseas stock investments seeking higher returns."
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