"My Stocks, My Decisions"... Retail Investors Withdrawing from Funds

1.5 Trillion KRW Net Outflow from Korean Equity Funds This Year
6.166 Trillion KRW Redemption on 13th... Largest Since KOFIA Records
Investor Deposits and Credit Balances Also Soar

[Asia Economy Reporter Minwoo Lee] Domestic equity funds have experienced net outflows for eight consecutive trading days this year, with nearly 1.6 trillion KRW withdrawn. Meanwhile, as the KOSPI 3000 era has begun, the direct investment enthusiasm among individual investors appears to be intensifying.

According to the Korea Financial Investment Association on the 15th, as of the 13th, 483.1 billion KRW was net withdrawn from the domestic equity fund market. This is the largest single-day net outflow since 492.6 billion KRW was withdrawn on September 13, 2013. The equity funds redeemed (withdrawn) on that day amounted to 616.6 billion KRW, marking the highest level since the association began compiling statistics on May 30, 2006. From the first trading day of this year on the 4th, net outflows continued every day for eight consecutive trading days. The total amount withdrawn during this period reached 1.5839 trillion KRW.

During the same period, investor deposits, which are standby funds in the stock market, also surged. According to the association, as of the 13th, investor deposits stood at 70.1397 trillion KRW, nearly 5 trillion KRW higher than the 65.523 trillion KRW recorded on December 31 of last year. On the 12th, it even reached an all-time high of 74.456 trillion KRW. This reflects a shift of funds from indirect investment to direct investment, continuing the 'Donghak Ant' craze seen last year.

The balance of margin loans, where investors borrow from securities firms to invest in stocks, also hit a record high. After surpassing 20 trillion KRW for the first time on the 7th, it reached a new record of 20.98 trillion KRW on the 13th. It is also estimated that more people are borrowing from traditional financial institutions to invest in stocks. According to banks, as of the 7th, 1,960 new credit loans through overdraft accounts were recorded at the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?doubling the 1,048 cases recorded on December 31 last year. Since the beginning of this year until the 7th, a total of 7,411 new overdraft accounts have been opened at these five banks.

While this investment enthusiasm supports the KOSPI 3000, the previously rapid growth momentum has slowed, prompting calls for cautious investment by individual investors. In fact, on the 11th, the KOSPI showed volatility of about 170 points within a single day. Jaehwan Heo, a researcher at Eugene Investment & Securities, pointed out, "It is difficult for the stock price rise from the end of last year to the beginning of this year to continue," adding, "Given that volatility expanded in January and February during the past three years that started optimistically, there is a possibility that volatility in the domestic stock market will increase after mid-January."

In particular, considering that the upward trend is shifting from the overall index to specific sectors and individual stocks, the risk of 'blind investment' by individual investors may increase. Sangyoung Seo, a researcher at Kiwoom Securities, said, "In the U.S. stock market, rotation is spreading from growth stocks to value stocks and from large-cap to small-cap stocks based on economic recovery and abundant liquidity," adding, "Similarly, in the domestic stock market, fluctuations will occur more according to changes in individual stocks rather than the index in this trend."

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