Individual investors in Korean stocks saw their brokerage account deposits decline 17.73% from 128.4 trillion won on June 18 to 105.6 trillion won as of July 24, according to the Korea Financial Investment Association on July 28. The 34 trillion won reduction in investor deposits occurred as the KOSPI index plummeted from the 9000 level to 6000 over approximately two months. Analysts attribute the deposit decline to retail investors absorbing large-scale foreign and institutional selling pressure, with leveraged product losses depleting their additional buying capacity in the Korean stock market.
Individual Investor Deposits Drop 34 Trillion Won in Two Months
Investor deposits reached a record high of over 139 trillion won on June 4. The deposits maintained the 110 trillion won level after recording 109.8 trillion won on April 8, but fell below 110 trillion won for the first time on July 9 to 107.1 trillion won. By July 22, deposits had declined further to 103.8 trillion won. Investor deposits represent funds that investors have transferred to brokerage accounts for stock trading or left in accounts after selling stocks.
Retail Buying Power Weakens During Market Decline
Individual investors' buying capacity showed visible weakening. Retail investors consistently net-bought whenever sell-side circuit breakers were triggered since June 23, defending the index. On June 23, when both sell-side circuit breakers and market-wide circuit breakers were activated, individuals net-bought 8.59 trillion won. However, on July 24 when circuit breakers were similarly triggered, their net buying amounted to only 5.17 trillion won. Kim Seok-hwan, researcher at Mirae Asset Securities, stated that individuals are in a state where additional buying capacity has been exhausted due to large losses in leveraged products, and that the counter-trade and deleveraging process needs to proceed further for supply and demand to stabilize.
Foreign Investors Reduce Selling Pressure in July
Foreign investors net-bought 1.1 trillion won in the KOSPI market in April, but switched to net-selling, recording 44.7 trillion won in May and 48.6 trillion won in June, expanding their net-selling volume. In July, they sold 9.8 trillion won worth, showing the rapid overselling trend has moderated. Starting July 16, foreign investors net-bought for five consecutive trading days. Cho Su-hong, head of NH Investment & Securities Research Center, stated that foreign investors historically responded to semiconductor profit increase cycles with net-selling, and as a result of continued net-selling, the current foreign ownership ratio in the KOSPI semiconductor sector is at historically low levels, so additional net-selling pressure from foreigners will gradually ease.
SK Hynix and Samsung Electronics Earnings Announcements Scheduled
SK Hynix's Q2 earnings announcement is scheduled for July 29, and Samsung Electronics' Q2 confirmed earnings announcement is scheduled for July 30. Yoon Chang-yong, head of Shinhan Investment Corp Research Center, stated that foreigners are the investment entity most likely to return first when valuation and earnings confidence are restored, so the key to future supply and demand will ultimately be whether foreign risk appetite recovers.
FAQ
What caused the 34 trillion won decline in Korean stock investor deposits?
The decline occurred as individual investors absorbed large-scale foreign and institutional selling while the KOSPI fell from 9000 to 6000, with losses in leveraged products depleting their buying capacity.
How much did foreign investors sell in the Korean stock market recently?
Foreign investors sold 44.7 trillion won in May and 48.6 trillion won in June, but their selling moderated to 9.8 trillion won in July, with five consecutive days of net buying starting July 16.
