As the domestic stock market continues to reach all-time highs, South Korean investors, known as "seohakgaemi," who have heavily invested in U.S. stocks, are now shifting to a selling trend. Amid ongoing U.S.-China tensions and geopolitical risks from the Middle East, the U.S. stock market has shown relative weakness this year, while the KOSPI index has gained momentum, raising expectations for the KOSPI to reach 8,000. This has led to a simultaneous movement of funds from U.S. stocks to the domestic market.
According to the Korea Securities Depository's Saveuro portal, South Korean investors recorded a net sell of $469 million in U.S. stocks last month. This marks the first time since June of last year that seohakgaemi have turned to net selling on a monthly basis. The selling trend has continued into this month, with net sales of $192 million in U.S. stocks from May 1 to May 13.
Previously, individual investors had been purchasing heavily into U.S. tech giants like Tesla and Nvidia, following their upward trends. However, in the past month, profit-taking on these two stocks has shifted the sentiment. During this period, South Korean investors sold a net $432 million in Tesla and $738 million in Nvidia, making these two stocks the top holdings among South Korean investors in the U.S. market.
Market analysts suggest that the recent rebound in U.S. tech stocks has prompted domestic investors to realize profits. Despite significant volatility in the U.S. market due to tariff disputes, geopolitical uncertainties, and concerns over prolonged high interest rates, the recovery of certain tech stocks has led investors to cash in on their gains. In the last month, Tesla and Nvidia shares rose by 22.26% and 14.92%, respectively.
Additionally, the return of investment accounts (RIA) policy is influencing the flow of funds. To benefit from a 100% exemption on capital gains tax for overseas stocks, investors must complete their sales by May 31, leading to an increase in the movement of overseas investment funds to domestic asset management accounts. There is a growing trend of reinvesting in the domestic stock market after realizing profits from U.S. stocks.
Conversely, the domestic market continues its strong upward trend. With increased foreign investment in sectors like artificial intelligence (AI) and semiconductors, the KOSPI has been consistently hitting new highs. Analysts are even discussing the possibility of the KOSPI reaching the 8,000 mark, as individual investor funds rapidly shift towards large-cap domestic stocks and exchange-traded funds (ETFs).
A securities industry official noted, "It appears that individual investors who have invested in U.S. tech stocks for an extended period are now realizing profits during this rebound phase. The strong momentum in the domestic market is attracting funds that were relatively undervalued compared to the U.S. market."
* This article has been translated by AI.
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