Retail Investors Focused on Tariff-Vulnerable Stocks
$16 Trillion Lost as Korean Investors Rushed to Buy Tesla
Foreign Investors Chose Defense and Tariff-Resistant Stocks
As U.S. President Donald Trump marked his 100th day in office, the investment performance of retail investors and foreign investors in the Korean stock market diverged sharply. While individual investors, who had a high proportion of their portfolios in domestic and global technology stocks such as semiconductors, were hit hard by the tariff shock originating from the United States, foreign investors managed to protect their accounts by focusing on defense and tariff-beneficiary stocks, even as they engaged in 'Sell Korea' strategies.
According to the financial investment industry on April 30, the KOSPI rose by about 1.7% from January 21, 2025 (local time January 20), when President Trump was inaugurated, until the previous day. While this performance lags behind the Hong Kong Hang Seng Index (+9.2%), Germany's DAX Index (+5.8%), and India's Nifty 50 Index (+5.6%) over the same period, it is considered resilient given that it significantly outperformed major developed market indices such as the S&P 500 (-8.6%), Nasdaq (-12.1%), and Japan's Nikkei 225 (-8.1%).
Despite the KOSPI demonstrating robust price defense amid U.S.-driven tariff shocks and political uncertainty, retail investors were unable to celebrate. During this period, domestic individual investors purchased approximately 2.7 trillion won worth of KOSPI stocks, but were overwhelmed by nearly 17 trillion won in net selling by foreign investors. SK Hynix, the top pick among retail investors, fell by more than 14%, while other heavily bought stocks such as Hyundai Motor (-7.63%), Samsung SDI (-23.11%), and HD Hyundai Electric (-18.57%) also tumbled. Only Samsung Heavy Industries, buoyed by the revival of the U.S. shipbuilding industry, rose by 10.75%, providing a rare bright spot.
Overseas stock accounts of Korean investors also took a direct hit. On January 20, 2025 (local time), the total value of U.S. stocks held by domestic investors was $116.544 billion (about 167 trillion won), but by April 25, it had sharply declined to about $105.444 billion (about 152 trillion won). Despite the high exchange rate hovering above 1,450 won per dollar, Korean investors responded to the New York stock market crash not by cutting losses but by averaging down, resulting in the evaporation of assets worth $11 billion (about 16 trillion won). In particular, the net purchases of Tesla, the favorite stock among overseas Korean investors, and TSLL, an ETF that leverages Tesla's performance twofold, exceeded $4.2 billion. Given that Tesla's share price dropped by 32% during this period, it was virtually impossible to avoid losses.
In contrast, foreign investors took a different approach in stock selection compared to retail investors. They generated solid profits by including defense stocks such as Hanwha Aerospace (+114.30%) and LIG Nex1 (+53.59%), as well as IT and utility companies less affected by tariffs, such as Kakao (+5.49%), NAVER (-4.15%), and Korea Electric Power Corporation (+23.86%), in their portfolios. Yoo Myunggan, a researcher at Mirae Asset Securities, commented, "Although the domestic stock market showed signs of recovery as tariff negotiations progressed, the difference in stock price growth rates between shipbuilding and steel sectors in April reached 34 percentage points, highlighting the extreme disparities in returns across sectors and individual stocks."
The securities industry’s optimistic outlook for a stock market recovery in May is welcome news for retail investors. Lee Kyungmin, a researcher at Daishin Securities, stated, "While the KOSPI is expected to continue testing and settling above the 2,600 level in the short term, an upward trend toward 2,750 is anticipated during the second quarter." He recommended a two-track strategy: "Hold both large-cap blue-chip stocks with attractive valuations (semiconductors and automobiles) and defensive stocks (domestic demand and financials) that benefit from interest rate cuts and provide economic resilience."
Kim Daejun, a researcher at Korea Investment & Securities, noted, "As previously subdued investor sentiment recovers, both domestic and international stimulus policies will act favorably on the stock market." He added, "In Korea, additional fiscal stimulus through a supplementary budget will support domestic demand, while in the U.S., policies aimed at restoring growth and ensuring financial stability may be implemented."
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