Ants' Herding Behavior as 'Another Form of Volatility'

On the 11th, when the KOSPI index surpassed the 3,200 mark intraday for the first time in history, dealers were working in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporter Hwang Junho] An analysis has been raised that the concentration phenomenon toward Samsung Electronics, which has become known as the 'national stock' due to intensive investment by individual investors, could become a hidden threat to the stock market in the future.

Samsung Securities analyzed on the 24th, "Looking at the stocks with net purchases by individual investors, there is a clear preference for large-cap stocks," adding, "Such concentration of large funds in a few companies is a cautionary factor as it may increase volatility."

The stock that attracted the most individual funds was Samsung Electronics. From December 1 last year to the 21st of this month, the top stocks by net purchases by individuals over the past month were Samsung Electronics, Hyundai Mobis, and Kia Motors, in that order. The investment proportion was 32.7% for Samsung Electronics, 9.5% for Samsung Electronics preferred shares, and less than 3% for the others.

This concentration phenomenon is not only found in South Korea but also in the United States. The index composed of stocks heavily traded on Robinhood, a free stock brokerage platform used by American retail investors, outperformed the S&P 500 by about 70% over the past year. While this can be interpreted as outstanding performance by individual investors, it also indicates that fund concentration on a few stocks is occurring in the U.S. as well.

However, Samsung Securities stated regarding this concentration phenomenon, "The continued concentration on a few stocks is a burden," and analyzed, "It implies the possibility of increased overall market volatility due to individual stock issues." A recent example is the news of Vice Chairman Lee Jae-yong's re-arrest, which caused Samsung Electronics to fall by 3.41%, and the market capitalization of 16 listed Samsung Group affiliates evaporated by 28 trillion won in one day.