As Chuseok Approaches, South Korean Investors Eye U.S. Stocks Again

As the Chuseok holiday approaches, individual investors in South Korea are selling off domestic stocks while continuing to buy U.S. stocks. Last year, prior to Chuseok, investors sold off more than 4 trillion won in domestic stocks, and during the holiday period, net purchases of U.S. stocks exceeded $1.2 billion. This trend suggests that this year, trading in U.S. stocks by South Korean investors may significantly increase during the domestic market closure.
Analysis from the Korea Securities Depository on September 23 shows that net purchases of U.S. stocks during the Chuseok holiday have been positive for the past four years. In 2022, during the two trading days when the U.S. market was open, net purchases amounted to $70.69 million. In 2023, during four trading days, the figure rose to $134.12 million, and in 2024, it was $4.08 million over three trading days. Last year, net purchases surged to $12.42 billion over five trading days, more than 300 times the previous year's amount.
The favorable atmosphere in the U.S. stock market contributed to the buying spree by South Korean investors. On October 3, the first day of the Chuseok holiday last year, the S&P 500 and the Dow Jones Industrial Average both reached record closing highs. Despite a federal government shutdown, expectations for further interest rate cuts by the Federal Reserve, due to a slowing job market, supported investor sentiment.
Additionally, prior to last year's Chuseok holiday, there was significant selling pressure in the domestic market. Individual investors sold a total of 4.0664 trillion won in the KOSPI and KOSDAQ over the three trading days leading up to the holiday. While it cannot be definitively concluded that the funds from domestic stock sales directly moved to U.S. stocks, it is likely that many investors reduced their domestic stock holdings while increasing their purchases of foreign stocks. In fact, net purchases of U.S. stocks during the holiday period doubled compared to the previous five trading days, which saw $557.59 million in net purchases.
Given the similar trends observed last year, analysts predict that investor interest in the U.S. stock market may again rise during this year's holiday period. Recently, the buying momentum among South Korean investors in U.S. stocks has continued, while selling pressure in the domestic market has intensified.
From September 1 to 22, net purchases of U.S. stocks by South Korean investors totaled $527.32 million. During the same period, total purchases amounted to $11.7397 billion, while total sales reached $11.2124 billion. Over the two days of September 21 and 22, individual investors sold a total of 4.4491 trillion won in the KOSPI and KOSDAQ markets, surpassing the total net sales of 4.0664 trillion won recorded over the three trading days before last year's Chuseok holiday. The pace of domestic stock sales ahead of the holiday is faster than last year, while buying remains strong in U.S. stocks.
Recent net purchases by South Korean investors have been relatively evenly distributed among short-term U.S. Treasury bonds, dividend stock ETFs, major index ETFs, and big tech stocks. From September 1 to 22, the top net purchase was the iShares 0-3 Month U.S. Treasury Bond ETF (SGOV) at $223.56 million. The Schwab U.S. Dividend Equity ETF (SCHD) followed with $146.20 million, and the S&P 500 ETF had $140.45 million. Among individual stocks, IonQ saw net purchases of $123.48 million, followed by Alphabet at $120.61 million and Amazon at $110.25 million.
Market analysts have identified liquidity conditions as a key variable for U.S. stock strategies following the holiday. Han Sang-hee, a researcher at Hanwha Investment & Securities, noted, "After the September interest rate hike, the reduction of Fed assets and changes in short-term funding market conditions have dampened liquidity momentum. A 'barbell strategy' that includes non-U.S. assets along with financial and energy sectors is more effective than a focus solely on U.S. growth stocks."