Even as South Korea’s stock market undergoes a steep correction, retail investors’ cumulative net buying this year has surpassed ₩200 trillion. While they absorbed foreign sell-offs by purchasing over ₩55 trillion worth of shares as the KOSPI tumbled more than 30% from its peak, concerns are rising about their capacity for further buying due to leveraged investment losses and declining customer deposits.
According to the Korea Exchange on the 9th, retail investors’ total net purchases of domestic stocks and exchange-traded funds (ETFs) from January 1 through the end of last month reached ₩201.85 trillion (approximately $143.4 billion). This figure combines stock trading and ETF net purchases across the KOSPI and KOSDAQ markets through both the Korea Exchange and the alternative trading system Nextrade.
Retail net buying surpassed ₩100 trillion at ₩107 trillion (approximately $76.0 billion) on May 15 and nearly doubled in less than three months. Notably, after the KOSPI peaked at 9,114.55 on June 22 and subsequently tumbled to the 6,200 level by the 7th, retail investors bought a total of over ₩55 trillion at lower prices — ₩38.96 trillion (approximately $27.7 billion) in domestic stocks and ₩16.46 trillion (approximately $11.7 billion) in ETFs.
By market, retail investors net purchased ₩104.55 trillion (approximately $74.3 billion) on the KOSPI market, ₩36.95 trillion (approximately $26.2 billion) on Nextrade, and ₩70.7 trillion (approximately $50.2 billion) in the ETF market. In contrast, they net sold ₩10.34 trillion (approximately $7.3 billion) on the KOSDAQ market, revealing a clear tilt toward large-cap stocks. The buying spree continued into this month, with retail net stock purchases reaching ₩141.83 trillion (approximately $100.8 billion) and ETF purchases at ₩72.32 trillion (approximately $51.4 billion) as of the 7th, pushing the combined total to ₩214.15 trillion (approximately $152.2 billion).
Retail investors’ year-to-date net purchases are more than 15 times the ₩13.16 trillion (approximately $9.4 billion) recorded during the same period last year, demonstrating unprecedented buying intensity. In the same period last year, retail investors net sold ₩979.9 billion (approximately $696.2 million) in domestic stocks while net purchasing ₩14.14 trillion (approximately $10.0 billion) in ETFs.
However, uncertainty looms over how long retail investors can continue to prop up the market’s downside. In a report on the 29th of last month, Citigroup Global Markets Securities estimated that retail investors have suffered losses of $38.7 billion, or approximately ₩54.86 trillion (approximately $39.0 billion), from their peak due to leveraged investments in individual stocks. Additionally, South Korean investors’ losses from U.S. stock investments over the past two months are estimated to be approaching ₩50 trillion (approximately $35.5 billion).
Customer deposits, considered the “ammunition” for retail investors, are also rapidly shrinking. Deposits, which neared ₩140 trillion (approximately $99.5 billion) on June 4, fell to ₩104 trillion (approximately $73.9 billion) by the 4th. Credit loan balances — a gauge of leveraged investing — also dropped from ₩38.63 trillion (approximately $27.4 billion) on June 24 to below ₩30 trillion (approximately $21.3 billion).
However, experts caution against interpreting the decline in deposits as an immediate weakening of retail buying power. Shin Seung-jin, head of the investment information team at Samsung Securities, explained, “Investor deposits are standby funds placed with securities firms for stock purchases. They exhibit a lagging nature — rising with expectations when the market climbs and falling with disappointment when it declines.” Na Jung-hwan, an analyst at NH Investment & Securities, added, “Deposits also decreased during the March correction but then hit new highs when the KOSPI subsequently rebounded. Judging future stock price direction solely by deposit balances is like trying to predict the road ahead by looking in the rearview mirror.”
Meanwhile, Japan’s stock market also experienced extreme volatility. During the first week of August (3rd–7th), the Nikkei 225 average endured a roller-coaster ride — plunging early in the week before sharply rebounding — ultimately holding the ¥65,000 (approximately $412.56) level.
Early in the week, the Nikkei was swept up in a rapid yen appreciation, at one point plunging more than ¥1,600 (approximately $10.16) on the 3rd to hit ¥62,727 (approximately $398.13). Bargain-hunting subsequently flowed in, recovering losses, and on the 5th, the index surged ¥2,342.91 (approximately $14.87) from the previous day to close at ¥66,300.44 (approximately $420.81), marking its largest single-day gain of the year. Profit-taking emerged over the following two sessions on the 6th and 7th, pushing the index slightly lower, but the close on the 7th at ¥65,606.71 remained elevated compared to early-week levels.
On the 8th, while Tokyo markets were closed for the weekend, all three major New York indices rallied. Buying centered on large-cap tech stocks drove the Dow Jones Industrial Average up 151.83 points to 54,036.93, while the S&P 500 rose 47.68 points to close at 7,757.64. The tech-heavy Nasdaq Composite led the advance, surging 342.26 points to 26,690.61.
With New York stocks climbing over the weekend, how Tokyo markets digest the positive cues when they reopen on the 10th will be key. Market participants are watching whether the Nikkei can attempt to retake the ¥66,300 level reached on the 5th and whether it can maintain the ¥65,000 downside support line.
However, Tokyo markets are entering the summer holiday season (Obon), and trading volumes are likely to thin sharply. With fewer market participants, even small fluctuations in overseas developments or exchange rates could trigger outsized stock price swings, warranting caution. The dollar-yen exchange rate is trading around ¥157.84 (approximately $1.00), tilting slightly toward a stronger yen compared to the Tokyo market close before the weekend (around ¥158.30), which could weigh on export-oriented stocks.