Individual investors still making large purchases of US stocks at high exchange rates... investing $600 million in semiconductor ETFs

Amid debates over high exchange rates and overheating concerns in artificial intelligence technology stocks, South Korean investors’ US stock investments, which had stalled, are showing signs of recovery. Recently, the strengthening of the US dollar combined with a correction in the US stock market has led some investors to reportedly start buying on dips.

According to data from the Korea Securities Depository’s securities information portal, domestic investors net purchased approximately $468.9 million worth of US stocks over four days from December 15 to 18. This is about double the net purchase amount of $228.28 million during the same period the previous week (December 8 to 12). This indicates that the net inflow of US stock purchases, which had been decreasing over the past few weeks, has reversed this week.

The recovery in investor sentiment is attributed to the US Consumer Price Index (CPI) falling below expectations and the positive earnings report from semiconductor company Micron Technology. The market interprets such indicators of slowdown as signals of increased likelihood of the Federal Reserve cutting interest rates. Additionally, analysts believe that Micron’s earnings somewhat alleviated concerns about overheating in AI core technology stocks, positively influencing buying psychology.

The most purchased domestic stocks are leveraged strategy-based semiconductor industry ETFs. The most representative is the “Direxion Daily Semiconductor Bull 3X ETF,” which tracks three times the return of the US ICE Semiconductor Index. The net purchase of this product reached $619.07 million, significantly ahead of the second-ranked Broadcom, which had $119.5 million in net purchases. This reflects the continued high expectations for the semiconductor industry domestically.

It is noteworthy that this recovery momentum occurred while the USD/KRW exchange rate remained high. Recently, the KRW/USD rate briefly broke through 1,482 KRW, becoming a source of instability in the foreign exchange market. The government pointed out that the spread of overseas investments by private individuals was one of the reasons for the high exchange rate and issued warnings. Financial authorities stated that if issues are found in securities firms’ overseas stock operations, they will consider on-site inspections or even suspension of business, demonstrating a firm stance on tightening regulation.

On the other hand, foreign investors have shifted to a net selling stance in the domestic stock market. According to data from the Korea Financial Investment Association, foreign investors net bought 33.772 trillion KRW from December 1 to 12, but net sold 3.576 trillion KRW from December 15 to 18. Notably, on December 16 alone, they sold about 1.4 trillion KRW, attracting attention.

Analysts believe that while this trend indicates a rebound in Korean investors’ interest in the US stock market, given the unstable foreign exchange market, fluctuations in domestic and international economic indicators, and the government’s regulatory tone, it is still premature to call it a trend reversal. Future changes in US monetary policy, corporate earnings flows, and whether the dollar’s strength can be sustained are expected to be the main variables influencing retail investor movements in Korea.