In the second quarter of this year, individual investors, including the "Seohak Ants" (South Korean retail investors focused on overseas US stocks), shifted to net selling of overseas stocks for the first time in 10 quarters. Analysts attribute this to a sharp rally in the domestic South Korean stock market and the won-dollar exchange rate approaching the 1,500 won mark, which led many to abandon US stocks and redirect funds toward the local market.

Overview of the Shift

However, this "return to domestic stocks" trend did not last long. Starting in June, retail investors resumed net buying of US stocks, and by July, the buying volume expanded significantly, signaling a reversal of the "Seohak Ants" capital flow back to overseas markets.

Data from the Bank of Korea's Economic Statistics System, released on August 10, shows that in Q2, overseas stock investments by non-financial entities, including individual investors, recorded a net sell-off of $525.7 million. This marks the first net selling by non-financial entities since Q4 2023, when they net sold $1.4726 billion.

In Q1 of this year, buying volume surged to $11.175 billion, before dropping to $2.216 billion in Q2. The trend reversed in subsequent quarters, with net buying of $3.2727 billion in Q3 and $14.6897 billion in Q4, continuing into Q1 of this year at $9.9125 billion.

Monthly Breakdown and Key Drivers

On a monthly basis, non-financial entities' overseas stock investments saw net selling of $424.9 million in April and $605.5 million in May. The tide turned in June, with net buying of $504.7 million.

Analysts point to the rapid rise of domestic Korean stock indices in April and May, combined with policies like the "Return to Local Market Account" (RIA) that offer tax incentives for investors selling overseas stocks to reinvest domestically, as key drivers behind the "Seohak Ants" shifting funds to local benchmarks such as the Korea Composite Stock Price Index (KOSPI).

Additionally, the won-dollar exchange rate hovering near 1,500 won significantly increased the currency conversion costs for new overseas investments, further dampening capital outflows.

Resumption of US Stock Buying

However, individual investors' net buying of US and other overseas stocks resumed in June. Focusing solely on US stocks, the buying spree intensified significantly in July.

Data from the Korea Securities Depository's SEIBRO platform shows that individual investors consistently net bought US stocks in January ($5.003 billion), February ($3.9491 billion), and March ($1.6915 billion).

In April, the trend flipped to net selling of $468.9 million, followed by another net sell-off of $939.8 million in May, totaling $1.4087 billion in net outflows over the two months.

In June, the market swung back to buyer dominance with net buying of $633 million. July saw net buying of $4.6424 billion, and as of the 7th of this month, an additional $609.1 million was net bought, bringing the cumulative net buying since June to $5.8845 billion.