Despite Calls for a Return to the Domestic Market, Korean Retail Investors Hold 250 Trillion Won in U.S. Stocks; Top Pick is Tesla

The amount of U.S. stocks held by domestic investors has surpassed 250 trillion won. Despite the high exchange rate and government efforts to encourage a "return to the domestic market," Korean retail investors' enthusiasm for investing in the U.S. market remains strong.

According to the Securities Information Portal (SEIBro) of the Korea Securities Depository on January 20, the value of U.S. stocks held by domestic investors reached an all-time high of $171.8 billion (approximately 253 trillion won) as of January 16. Considering that the amount was $163.5 billion (about 241 trillion won) at the end of last year, this marks an increase of $8.3 billion (about 12 trillion won) in just two weeks.

The amount of U.S. stocks held by Korean investors has been increasing every year since 2022. At the end of 2022, the figure stood at $44.2 billion (about 65 trillion won), which rose to $68 billion (about 100 trillion won) the following year, and then surged to $112.1 billion (about 165 trillion won) in 2024. Even as the won-dollar exchange rate has soared above 1,470 won recently, Korean retail investors continue to invest in the U.S. market.

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The most favored stock among Korean retail investors remains Tesla. As of January 16, domestic investors held $27.5 billion (about 41 trillion won) worth of Tesla shares, making it the top U.S. stock. Big tech companies such as Nvidia ($17.8 billion), Alphabet A ($7.2 billion), Palantir ($6.5 billion), and Apple ($4.2 billion) followed. Microsoft ranked 10th with $3.3 billion.

Index-tracking ETFs (Exchange-Traded Funds) also ranked high in investor portfolios. The "Invesco QQQ Trust SRS 1," which tracks the Nasdaq 100 index, accounted for $3.9 billion, while the "Vanguard SP 500 ETF SPLR," which tracks the S&P 500 index, held $3.7 billion, ranking seventh and eighth in terms of holdings, respectively.

Leveraged ETFs, such as the "ProShares UltraPro QQQ" ($3.4 billion), which tracks triple the daily returns of the Nasdaq 100 index, were also popular among domestic investors. These are high-risk, high-leverage products not available in the domestic market, and financial authorities are currently considering introducing such leveraged ETFs to the Korean stock market.

Until now, leverage and inverse products in Korea have been limited to a maximum of twice the underlying index, but as Korean retail investors have shown strong demand for these products, regulators have begun working on easing restrictions to encourage the return of capital to the domestic market.

Additionally, authorities have proposed a temporary measure exempting investors from the 20% capital gains tax on overseas stocks for one year if they sell their overseas holdings and invest in domestic stocks for a year through a "Return to Domestic Market Account" (RIA).

Yeom Dongchan, a researcher at Korea Investment & Securities, stated, "It is difficult to predict the amount of funds that will return due to the RIA policy, but it should be viewed as a positive move for exchange rate stability and the domestic capital market."

Lee Sujeong, a researcher at Meritz Securities, commented, "The impact of returning Korean retail investors on the domestic stock market could be more significant than the exchange rate. In particular, if the funds concentrate on large-cap stocks and index ETFs, the perceived impact will be even stronger."