This year, individual investors have exhibited a trading pattern reminiscent of a 'contrarian' approach, buying when stock prices fall and selling during rebounds. In 2026, individual investors recorded a net purchase of 91 trillion won in the KOSPI index. How did this contrarian investment strategy perform?
According to the Korea Exchange, from January 2 to October 6, individual investors made a total net purchase of 91.1276 trillion won in the securities market. Notably, they bought 77.4949 trillion won over just two months in May and June, accounting for about 85% of the total net purchases. However, net purchases decreased to 5.3715 trillion won in July and 3.2353 trillion won in August, with a reversal to net sales of 14.1971 trillion won in September.
During this period, there was a clear inverse correlation between individual investors' daily trading and the movements of leading stocks. An analysis of the net purchases by individuals in the KOSPI and the daily fluctuations of Samsung Electronics and SK Hynix over 185 trading days revealed correlation coefficients of -0.68 and -0.67, respectively. This indicates that when leading stocks declined, individual investors increased their KOSPI purchases, and when these stocks rose, their selling activity intensified.
The results of this contrarian trading strategy have not been favorable. On June 23, when individuals made their largest net purchase of 8.591 trillion won, Samsung Electronics and SK Hynix saw declines of 16.0% and 28.4%, respectively, over the following 20 trading days. Similarly, after the second-largest net purchase of 8.1919 trillion won on June 26, the stock prices of these companies fell by 25.2% and 32.1%.
Conversely, after significant net sales, these companies' stock prices surged. Following a net sale of 5.4161 trillion won on April 8, Samsung Electronics rose by 27.6% and SK Hynix by 63.2% over the next 20 trading days. After a net sale of 4.7936 trillion won on May 4, their stock prices increased by 51.2% and 58.8%, respectively.
However, not all contrarian trades have been misguided. On May 15, after a net purchase of 7.2308 trillion won, Samsung Electronics and SK Hynix rose by 26.8% and 31.0%, respectively, over the next 20 trading days. Similarly, after a net purchase of 7.029 trillion won on March 23, their stock prices increased by 15.1% and 25.0%.
Recently, this trading pattern has shifted. After purchasing over 77 trillion won in the KOSPI during May and June, individual investors reduced their buying in July and August, transitioning to net sales of 14 trillion won in September. As of October 6, they have continued this trend, selling a net 2.4559 trillion won.
A securities industry official noted, 'Individual investors tend to buy on dips when prices fall significantly and realize profits during rebounds. However, in a strong trending market, contrarian trading can lead to poor outcomes.'
* This article has been translated by AI.
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