Foreign Investors Flock to US Stock Market Amid Volatile KOSPI

[Asia Economy Reporter Eunmo Koo] Amid the recent increased volatility in the domestic stock market over the past two trading days, domestic investors who expanded their investment scope beyond Korea to overseas markets last year are continuing their enthusiasm for overseas investments in the new year.

According to the Korea Securities Depository's securities information portal SEIBro as of the 13th, domestic investors have net purchased $1.31597 billion (approximately 1.4462 trillion KRW) in the U.S. stock market from the beginning of this year through the 11th. This amount is about 10 times larger than the same period last year ($130.36 million) and accounts for roughly 25% of the net buying volume by individual investors in the domestic KOSPI market (6.238 trillion KRW) as of the 11th.

By individual stocks, Apple ranked first in net purchases of overseas stocks. Domestic investors have net bought $346.44 million worth of Apple shares up to the previous day this year, with Tesla, which was the most purchased by domestic investors last year ($195.10 million), ranking second. Following were Baidu ADR ($69.92 million), Vanguard Tax-Exempt Bond ETF ($55.82 million), TSMC ADR ($42.70 million), and Global X Lithium ETF ($41.14 million), among the top net purchased stocks.

The U.S. stock market is generally maintaining a moderate upward trend amid positive outlooks, and with the recent two-day correction in the domestic market raising concerns about an asset bubble, domestic investors’ overseas investments seem to be gaining momentum. Recently, the U.S. stock market has shown an upward trend influenced by expectations for additional economic stimulus measures from the Joe Biden administration. KB Securities researcher Ilhyuk Kim stated, "The U.S. stock market is leading price increases as earnings forecasts are being revised upward," adding, "With the Biden administration expanding fiscal spending and economic activities normalizing due to vaccine distribution, cyclical rises in economically sensitive sectors are expected."

In particular, Apple has attracted increased interest from domestic investors due to growing expectations for iPhone 12 sales performance and news of jointly developing the ‘Apple Car’ with Hyundai Motor Group. Although Hyundai Motor later announced that nothing has been decided, investor interest in Apple, which needs to foster new growth businesses, is expected to continue. Since starting the Titan Project in 2014, Apple has expressed strong interest in electric and autonomous vehicles and holds numerous patents related to automobiles, including acquiring the autonomous driving startup Drive.ai in 2019.

On the other hand, the domestic stock market experienced a sharp increase in volatility and heightened investor anxiety over the past two days due to profit-taking desires following a short-term surge mainly in mega-cap stocks combined with the possibility of tapering (reduction of quantitative easing) by the U.S. Federal Reserve (Fed). Market participants fear tapering due to past experiences with tightening shocks. Previously, emerging market stock markets underwent significant corrections for about a month in May 2013 when then-Fed Chairman Ben Bernanke mentioned the possibility of tapering.

However, there is no need to be excessively concerned about tapering at this early stage, so it is unlikely that the trend of investment concentration overseas will intensify. Cape Investment & Securities researcher Jiyoung Han said, "Since the rally was driven by a short-term surge in mega-cap stocks, it is necessary to keep open the possibility of a breathing period," but also evaluated, "Considering that domestic companies are entering a profit improvement cycle, it is too early to say that the market’s direction has been compromised."