Donghak, Seohak, and Coin Retail Investors "All in Tears"... The Panic Selling Fear Has Just Begun (Comprehensive)

Top Stocks by Net Buying of Individual Investors All Show Negative Returns
'One-shot Betting' by Seohak Gaemi, Losses Also Snowballing 2-3 Times
Cryptocurrency Plunge, Hard to Gauge Crash Trend Showing Signs of 'Exit'

[Asia Economy Reporters Seon-ae Lee, Min-ji Lee, Byung-seon Gong] Domestic investors investing in Korean stocks, overseas investors investing in foreign stocks, and crypto investors have all fallen into 'panic.' Both the stock market and the cryptocurrency market have plunged sharply, resulting in estimated massive losses. The problem is that fear still remains. Having already entered 'panic selling' due to fear, the amount of losses is expected to snowball.

◆All Donghak Ants' Returns Are Negative= According to the Korea Exchange on the 26th, the top stocks by net purchase by individuals last year were Samsung Electronics, Hyundai Mobis, Kakao, Hyundai Motor, SK Hynix, LG Electronics, Naver, SK Biopharm, Kumho Petrochemical, and NCSoft, all of which are estimated to have negative returns (based on closing prices from the end of last month to the 25th of this month). Kakao fell by -22.13%, and SK Biopharm, Naver, NCSoft, and Kumho Petrochemical also recorded double-digit losses of -18.11%, -14.93%, -13.22%, and -11.14%, respectively.

The top net purchased stocks this month include Kakao, Samsung Electronics, Naver, KakaoBank, Krafton, Kia, and HYBE. Krafton's return is as low as -34.3%, while KakaoBank and Kakao are at -28.9% and -21.4%, respectively. HYBE (-21.0%), Naver (-12.6%), and Samsung Electronics (-4.5%) also suffered significant losses.

The problem is that short-selling balances have accumulated mainly in the top net purchased stocks. Krafton (479.2 billion KRW), HMM (435.8 billion KRW), KakaoBank (385.7 billion KRW), and Samsung Electronics (362.6 billion KRW) are among them. The accumulation of short sales means that a larger decline is inevitable in a falling market. Forced liquidation amounts also reached an average of 20 billion KRW per day this month, which is expected to exacerbate the stock price decline.

The lower band of the KOSPI index in the securities industry has also started to drop. Samsung Securities has forecasted it could fall to 2650, while Daishin Securities and BNK Investment & Securities have diagnosed that a break below 2700 is possible. Lee Kyung-min, a researcher at Daishin Securities, warned, "The current global financial environment is at the turning point from the first to the second phase of decline," adding, "In February, as economic indicators for January are confirmed, economic anxiety may intensify, so volatility is likely to increase."

◆Overseas Investors with Leverage Also Suffer Double Losses= Overseas investors, known as Seohak Ants, who have turned their attention abroad, are deeply worried. The Nasdaq index has fallen more than 14.5% since the beginning of the year, returning to levels seen a year ago, while the Dow Jones Industrial Average and the Standard & Poor's 500 Index, composed of 30 blue-chip companies, have dropped more than 6.3% and 9.2%, respectively. Even Tesla and Apple stocks have fallen by double digits.

According to the Korea Securities Depository's securities information system, SEIBRO, the most purchased stock until the previous day was 'PROSHARES ULTRAPRO QQQ ET.' This is a leveraged product that tracks three times the return of the Nasdaq 100 index, and domestic investors bought 489.7 billion KRW worth during this period. Leveraged products can yield two to three times the profit when the market rises, but losses can exceed two to three times when the market falls. As the Federal Reserve's accelerated tightening clock caused the interest rate-sensitive Nasdaq index to plunge, investors judged this as a buying opportunity and engaged in massive accumulation, resulting in a 'one-shot bet.' About half of the top 15 net purchases were leveraged products seeking high returns.

Experts advise caution against 'averaging down,' which is buying more at lower prices to reduce the average purchase price. Kim Sang-hoon, a researcher at KB Securities, said, "Supply and demand data that can indicate market direction are generally negative," adding, "Credit margin is decreasing, and foreigners are net selling U.S. stocks, so the support for the downside is weak. Therefore, buying should be restrained until concerns reach their peak."

◆Even Speculative Demand Is Disappearing: "Panic in Crypto"= The cryptocurrency crash is bringing tears to millennial and Gen Z investors. Among new members of Korea's four major cryptocurrency exchanges (Upbit, Bithumb, Coinone, and Korbit), those in their 20s account for 32.7%, and those in their 30s account for 30.8%.

According to Upbit, Bitcoin has fallen about 21% this month, showing sluggish performance. Compared to the peak of 82.7 million KRW reached in November last year, it is about half. Bitcoin's price in the 40 million KRW range is the first time in about five months since August 8 last year. The decline in NFT (non-fungible token)-related cryptocurrencies, which surged in November last year, is even greater. WEMIX, a cryptocurrency issued by Wemade, has dropped 56% from its peak. Sandbox and PlayDapp also plunged 65% and 77%, respectively, from their highs.

The problem is that the extent of the crash is still unpredictable. There are concerns that if it falls further, even speculative demand will disappear. The digital asset fear and greed index operated by Dunamu, Upbit's operator, is at 30.99, entering the fear stage. Hong Ki-hoon, a professor of business administration at Hongik University, explained, "Because uncertainty is accumulating, it is impossible to forecast prices," adding, "There is a trend of cashing out across the entire asset market, so the number of investors exiting the cryptocurrency market is expected to increase."