Korean retail investors accelerated their exit from domestic stock markets on Jan 28 as KOSPI breached the 6,000 level and KOSDAQ fell below 700 intraday, triggering massive losses. The sell-off followed a year of unprecedented volatility, with 42 sidecar triggers and 22 circuit breakers activated in Korean markets as of Jan 28, according to Korea Exchange data. Government-promoted single-stock leveraged ETFs on Samsung Electronics and SK Hynix, introduced as exchange rate stabilization measures, resulted in average losses exceeding 45% for retail participants, with investor deposits declining 30 trillion won from their peak as capital flowed to US stocks and bank deposits.
Korean Markets Trigger 42 Sidecars and 22 Circuit Breakers
Korea Exchange reported 42 sidecar activations and 22 circuit breaker triggers in domestic markets as of Jan 28. KOSPI fell 36% from its yearly intraday high, while KOSDAQ dropped 43% over the same period. Individual investors described the market as "impossible for retail participants to profit in" amid the volatility.
Single-Stock Leveraged ETFs Record 45% Average Loss
Investors in single-stock leveraged products suffered severe losses. As of Jan 24, the average return for NH Investment Securities clients holding the KODEX SK Hynix Single Stock Leverage ETF stood at -45.43%. Only 0.01% of all investors in the product recorded profits, while 99.99% incurred losses. Retail participants lost more than half their principal in these government-promoted instruments designed to stabilize exchange rates.
Investor Deposits Drop 30 Trillion Won From Peak
Investor deposits, considered standby capital for market entry, declined to 109.17 trillion won as of Jan 27, down 30 trillion won from the yearly peak of 139.69 trillion won recorded on the 4th of the previous month, according to Korea Financial Investment Association data. Lee Jae-won, a researcher at Yuanta Securities, stated that "individual buying power at lower prices has continuously weakened since this month" and "there is no net buying entity to drive an index rebound in terms of supply and demand."
Korean Investors Pour $3.6 Billion Into US Stocks in January
Korean investors purchased a net $3.59 billion in US stocks from Jan 1 to 27 (based on inquiry date), according to Korea Securities Depository data released on Jan 28. Net purchases totaled $2.53 billion through Jan 23, then surged by $1.06 billion over two trading days.
Bank Time Deposits Surge 15.9 Trillion Won
Funds previously withdrawn from bank deposits to trade stocks showed signs of returning. Time deposit balances at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) reached 965.29 trillion won as of the 15th, up 15.89 trillion won from the end of the previous month. This marked the largest increase since May of the previous year (18.4 trillion won), a span of one year and two months. If the trend continued through month-end, it would represent the largest increase since October 2022 (47.72 trillion won), a period of three years and nine months.
FAQ
What caused 42 sidecar triggers in Korean stock markets?
Korea Exchange activated 42 sidecar mechanisms and 22 circuit breakers in domestic markets as of Jan 28 due to extreme price volatility. KOSPI fell 36% and KOSDAQ dropped 43% from their respective yearly intraday highs.
How much did investors lose in single-stock leveraged ETFs?
As of Jan 24, investors in the KODEX SK Hynix Single Stock Leverage ETF through NH Investment Securities recorded an average loss of -45.43%. Only 0.01% of participants were profitable, while 99.99% incurred losses exceeding half their principal.
Where are Korean retail investors moving their capital?
Korean investors purchased a net $3.59 billion in US stocks from Jan 1 to 27, with $1.06 billion flowing in over two trading days after Jan 23. Simultaneously, time deposit balances at five major banks increased 15.89 trillion won in the first half of the month, the largest rise in one year and two months.
