SEOUL, August 15 (AJP) - South Korean retail investors are edging back into risk after July's market washout, with brokerage cash returning above 100 trillion won, margin borrowing rising for a seventh straight session and traders piling back into a triple-leveraged U.S. semiconductor fund.
Investor deposits — cash sitting in brokerage accounts and available for securities purchases — rose to 100.07 trillion won ($70.6 billion) on Aug. 13, up 91.9 billion won from the previous session, according to the Korea Financial Investment Association. The balance returned above 100 trillion won after three trading days.
The rebound is modest compared with the liquidity that powered Korea's first-half stock frenzy.
Investor deposits peaked at a record 139.69 trillion won on June 4, before sliding to 97.93 trillion won on Aug. 11. Even after the latest recovery, the pool remains nearly 40 trillion won, or 28 percent, below that peak.
The decline did not necessarily mean investors have abandoned Korean equities. Some cash may already have been deployed into stocks or moved to other investments.
Risk appetite itself has returned more quickly. Outstanding margin-financing loans rose to 30.93 trillion won on Aug. 13, marking a seventh consecutive increase. The balance had dropped to around 27.4 trillion won on Aug. 4 during the market's deleveraging, meaning borrowing has recovered by roughly 13 percent from that trough.
The same willingness to take leveraged risk is showing up overseas.
Korean investors net bought $662.85 million of Direxion Daily Semiconductor Bull 3X Shares, better known by its ticker SOXL, on Aug. 12 and 13, according to Korea Securities Depository's SEIBro portal.
They bought $544.46 million on Aug. 12 and another $118.39 million the following day, abruptly reversing heavy selling earlier in the month.
SOXL seeks to deliver three times the daily performance of the Philadelphia Semiconductor Index, making gains — and losses — substantially more volatile than movements in the underlying chip stocks.
The latest purchases mark another sharp change of direction for Korea's so-called Seohak ants, a Korean term for individual investors trading foreign equities. Donghak (East-bound) refers to investors dedicated to home stocks.
They had sold a net $1.64 billion of SOXL through Aug. 11, including $664.39 million on Aug. 3 alone, after aggressively accumulating the product during the previous month. The two-day buying spree reduced their August net selling in the fund to $976.08 million through Aug. 13.
The reversal coincided with a rebound in U.S. semiconductor shares. The Philadelphia Semiconductor Index climbed to 12,456.00 on Aug. 13 from 10,447.49 on July 29 as fears that the semiconductor cycle was approaching a peak eased. SOXL itself rose more than 25 percent to $145.36 on Aug. 13 from $114.72 at the end of July.
Korean investors' two-day net purchases of SOXL were about 13 times the $62.09 million they put into Alphabet, the second-biggest net purchase during the period.
Their SOXL holdings were valued at $6.56 billion as of Aug. 12, making the leveraged fund their fourth-largest U.S. equity position after Tesla, Nvidia and Alphabet. SOXL had ranked only 10th at the end of April.
The buildup follows months of unusually aggressive trading in the product.
Korean investors net bought $40.87 million of SOXL in June before purchases exploded to $3.79 billion in July. They began August as heavy sellers before returning to the buy side this week.
Their appetite for U.S. stocks more broadly has also held up. Korean investors were net buyers of $1.16 billion in U.S. equities through Aug. 13, extending a net-buying streak that began in June. July purchases were much larger at $4.67 billion. Amazon, SpaceX and Alphabet ranked as the three largest net purchases so far this month.
AJP Takeaways
- Investor deposits recovered above 100 trillion won, but remain about 28 percent below their June record, showing that market liquidity has yet to return to first-half levels.
- Leverage is rebuilding faster than cash: margin-financing balances rose for a seventh session to 30.93 trillion won, while Korean investors bought $662.85 million of triple-leveraged SOXL in two days.
- The chip trade remains the center of retail risk-taking: SOXL has become Korean investors' fourth-largest U.S. equity holding despite the violent reversal between July's buying spree and early-August selling.
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