Stuck in a Tight Box Range, Retail Investors Betting on a Rise

Divergent Moves from Institutions... Daily 2x Leveraged ETF Sees Highest Monthly Purchases
KOSPI Bottom Reached Judgment... Institutions Bet on Downturn Amid Inflation Concerns

[Asia Economy Reporter Gong Byung-sun] As the KOSPI remains trapped in a box range, individual investors (retail investors) and institutional investors are showing divergent behaviors. Retail investors are betting on a rise in the KOSPI, while institutions are wagering that it will fall further.

According to the Korea Exchange on the 22nd, the exchange-traded fund (ETF) with the highest trading value so far this month until the previous trading day, with transactions totaling 6.0316 trillion KRW, was Samsung Asset Management’s ‘KODEX Leverage,’ which tracks twice the daily return of the KOSPI 200 index. Individuals net bought 31.5 billion KRW, foreigners net bought 6.8 billion KRW, while institutions net sold 25.9 billion KRW of this ETF.

The same applies to ‘KODEX 200,’ which rises alongside the KOSPI 200 index, composed of 200 selected companies listed on the KOSPI. Individuals net bought 3.1 billion KRW, foreigners net bought 32.1 billion KRW, betting on a rise, but institutions net sold 25.9 billion KRW. The trading value of KODEX 200 in November ranked third among all ETFs at 2.6558 trillion KRW.

On the other hand, institutions heavily invested in products that profit when the KOSPI falls. During the same period, for ‘KODEX 200 Futures Inverse 2X,’ which recorded 5.4182 trillion KRW in trading volume, institutions net bought 101.2 billion KRW. Individuals and foreigners net sold 49.8 billion KRW and 47.9 billion KRW, respectively.

Another ETF that tracks the KOSPI’s decline, ‘KODEX Inverse,’ was also mainly purchased by institutions. Institutions and foreigners net bought 19.2 billion KRW and 3.8 billion KRW, respectively, while individuals net sold 22.5 billion KRW.

It is interpreted that retail investors perceive the KOSPI, trapped in a box range, as having reached a bottom. They judge that after a pause, there is potential for an upward move alongside the with-COVID (gradual return to normal life) phase. The consumer sentiment index for October, announced by the Bank of Korea on the 27th of last month, rose 3 points from the previous month to 106.8. A consumer sentiment index above the baseline of 100 indicates a long-term optimistic outlook on economic recovery.

The fact that many retail investors entered the stock market after the KOSPI surpassed the 3,000 mark also seems to have influenced this judgment. In fact, the KOSPI’s trading value, which had plummeted to 5.4711 trillion KRW in February last year due to the spread of COVID-19, surged to an average daily trading value of 26.4778 trillion KRW in January this year after the KOSPI exceeded 3,000. On January 11, the KOSPI’s daily trading value reached a staggering 44.4338 trillion KRW.

However, institutions appear more concerned about inflationary pressures. According to the Bank of Korea, the producer price index for October rose 0.8% from the previous month to 112.21, marking a 12th consecutive month of increase. The United States, which influences the domestic stock market, is also tense due to inflation. The U.S. Bureau of Labor Statistics announced that the consumer price index for October rose 6.2% year-on-year, the largest increase since November 1990.

Hwang Se-woon, a research fellow at the Korea Capital Market Institute, explained, "High levels of inflation accelerate tapering (asset purchase reduction). Since this leads to liquidity contraction, it can be considered a factor that may trigger a correction in the domestic stock market."

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