Korean Retail Investors Buy $1.6B as KOSPI Tumbles

On Monday, retail investors in South Korea bought $1.6 billion of equities, taking the opposite side of a market in which foreign and institutional players were rushing to sell.

The KOSPI dropped 2.70% on Sept. 28, ending at 6,889.75 when trading resumed after the Chuseok holiday. Foreign investors sold 3.23 trillion won ($2.4 billion), while institutions added another 1.02 trillion won ($750 million) to the selloff.

Two Sides to the KOSPI Selloff

Foreign investors attributed the decline to a stronger US dollar and short-term concerns about Korea's semiconductor industry. Institutions, led by financial investment firms, investment trusts and pension funds, made the same assessment and followed with sales.

Retail traders read the same headlines but came to the opposite conclusion. They viewed Monday's drop as an opportunity rather than a warning, and they were the only net buyers on the KOSPI that day.

Their buying intensified as the day progressed. Net retail purchases climbed from about 145 billion won ($106 million) in the early session to 2.21 trillion won at the close, even as the KOSDAQ, Korea's secondary board, closed slightly higher.

The 'Ants' Have Seen This Before

South Korean individual investors are known as “the ants,” a nickname that comes from their tendency to join forces and buy into falling markets. The label goes back to 2020, when they absorbed a wave of foreign selling during the pandemic crash and were largely proven correct by the subsequent rebound.

The strategy does not always succeed. A leveraged exchange-traded fund (ETF) tracking SK hynix lost 45% of its value earlier this year, damaging retail investors who had held it as a long-term position instead of a short-term trade.

Samsung Electronics and SK hynix, the two stocks behind Monday's slide, will provide an early signal of which scenario unfolds. Both declined more than 5%, extending the volatility that has already made the KOSPI more volatile than Bitcoin this year.

If the retail buying has found a floor, Samsung and SK hynix should steady within days, and the KOSPI could quickly retest 7,000. If not, the foreign selling on Monday may turn out to be just the beginning, pushing Goldman's target further out of reach.