'Debt-Fueled Retail Investors' Flock to COVID-19 Stocks and ETFs

Theme Stock Shift Targeting Short-Term Gains

[Asia Economy Reporter Oh Ju-yeon] Recently, individual investors' 'debt investment (borrowing to invest)' has mostly concentrated on novel coronavirus disease (COVID-19) theme stocks, presidential election theme stocks, and exchange-traded funds (ETFs). During the previous COVID market phase, these investors, known as 'smart ants' for accumulating large-cap stocks like Samsung Electronics and SK Hynix at low prices for long-term investment, are now shifting their investment focus back to theme stocks. This shift is interpreted as a move toward stocks that can potentially yield higher short-term returns after the long-term blue-chip stocks they purchased failed to meet expected profit rates. However, these stocks are highly volatile, raising concerns that the risk of 'bust' is as high as that of a 'big win.'

According to the Korea Exchange on the 19th, from the 4th to the 18th of this month, the stock with the highest margin loan balance ratio (the ratio of stocks purchased on credit relative to total shares) in the KOSPI market was the 'KODEX KOSDAQ 150 Futures Inverse ETF,' with a margin loan balance ratio of 13.31%. This was because investors, anticipating a decline after the KOSDAQ index rose close to the 700 level, heavily purchased the inverse ETF. Following this were mask-related stocks like Monalisa (11.2%), a beneficiary of COVID-19, and diagnostic kit-related stocks such as Wooridul Pharmaceutical (9.32%), which also had high margin loan ratios. Other COVID theme stocks included Myungmoon Pharmaceutical (8.71%), Kukje Pharmaceutical (7.56%), and Monami (6.75%), as well as presidential election theme stocks like Hanchang Paper (7.97%) and Namseon Aluminum (8.05%), all showing high margin loan balance ratios.

Their stock prices surged sharply in a short period, sometimes more than doubling during the recent rebound. Compared to the stock price returns of Samsung Electronics, which individual investors bought the most, these theme stocks achieved higher profits in a shorter time. Samsung Electronics' closing price rose from 42,500 KRW on March 29 to 48,800 KRW on the 18th of this month, a 14.8% increase. During the same period, the KOSPI rose from 1,482.46 to 1,937.11, a 30.67% increase. Judging that they 'did not enjoy much profit' relatively, individual investors appear to have turned their attention to theme stocks.

The theme stock concentration phenomenon was even more pronounced in the KOSDAQ market. The top 10 stocks with the largest net increase in margin loan balances this month included Daewoo Ti, Celltrion Pharm, Seegene, SK Bioland, Ananti, SMAC, Korea Alcohol, Lemon, MedPacto, YBM Net, and JNTC. Daewoo Ti and Ananti are related to inter-Korean economic cooperation, while Seegene and Lemon are classified as COVID-19-related stocks.

The problem is that as COVID-19 spreads and stabilizes repeatedly, the fluctuations of related stocks are becoming more severe. As of 10:30 a.m. on this day, most COVID diagnostic kit-related stocks showed weakness. This was because the U.S. stock market surged the previous day on hopes for COVID-19 vaccine development, easing fears about the virus somewhat.

A securities industry official said, "While rational investment in low-priced stocks from a mid- to long-term perspective is positive, caution is necessary regarding situations where demand is concentrated for short-term speculative trading purposes."

This content was produced with the assistance of AI translation services.