Foreign Investors Turn to Buying US Stocks Again Amid 'King Dollar'... Net Purchase of 194 Billion KRW This Month

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Due to the expectation that the 'King Dollar' will continue for the time being, Korean investors who had maintained a 'selling' stance have switched back to a 'buying' stance.

According to the Korea Securities Depository on the 18th, domestic investors purchased U.S. stocks worth $139.57 million (approximately 194 billion KRW) from the 1st to the 16th of this month.

Domestic investors had consistently taken a buying position in the U.S. stock market this year but stopped net buying due to the weak U.S. stock market and a sharp rise in the exchange rate, resulting in net sales of $3.67 million (about 510 million KRW) and $571.53 million (about 794.4 billion KRW) in July and August, respectively. This is interpreted as a move to enjoy foreign exchange gains from the dollar surge on stocks that rebounded after July.

However, this month, before the release of the U.S. Consumer Price Index (CPI) for August, the U.S. stock market rebounded mainly in growth stocks, and with the won-dollar exchange rate approaching the 1,400 won level and continuing its rapid rise, interest appears to have shifted back to U.S. stocks.

So-eun Ahn, a researcher at KB Securities, analyzed, "In a situation where the global stock market performance is generally poor, the perception that the U.S. is a relatively stable market with less volatility and the expectation that the dollar will continue to strengthen seem to have influenced investors' buying decisions."

She added, "The U.S. is continuing its tightening, and since the economy is not expected to sharply decline immediately, the dollar's strong trend is likely to be supported. In the absence of other regional asset classes showing remarkable strength, from the perspective of domestic investors, U.S. stocks are expected to maintain relative superiority for the time being, including in terms of foreign exchange gains."

As volatility continues for a long time, recently, Korean investors have been mainly flocking to leveraged products.

This month, the stocks most net purchased by Korean investors were the ProShares UltraPro QQQ ETF (TQQQ), which tracks three times the return of the Nasdaq 100 index ($131.98 million), the Direxion Daily Semiconductor Bull 3X Shares ETF, which tracks three times the Philadelphia Semiconductor Index ($128.29 million), Nvidia ($42.01 million), the ProShares UltraPro Short QQQ (SQQQ), which inversely tracks three times the Nasdaq 100 index ($23.87 million), and the BMO MicroSectors FANG Innovation 3X Leveraged ETN, which tracks three times the return of 15 U.S. tech stocks ($18.45 million), in that order.

During this period, in terms of simple purchase amounts, SQQQ, which inversely tracks three times the Nasdaq 100 index ($609.45 million), and TQQQ, which tracks three times the Nasdaq 100 index ($693.5 million), ranked first and second, respectively. The Direxion Daily Semiconductor Bull 3X Shares ETF, which tracks three times the Philadelphia Semiconductor Index ($488.04 million), ranked third, and the inverse ETF tracking three times the inverse of the Philadelphia Semiconductor Index ($280.29 million) ranked fifth.

Researcher Ahn said, "The fact that both the leveraged and inverse leveraged products are competing for the top two purchase spots indicates a very high level of uncertainty in interpreting market direction," adding, "A conservative strategy is necessary until inflation stabilizes and the Federal Reserve's monetary policy peak is confirmed."

KB Securities recommended a strategy focusing on defensive sectors such as utilities, telecommunications, and essential consumer goods, which are less negatively impacted by inflation, a strong dollar, and demand slowdown.

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