By Jihoon Lee and Cynthia Kim
SEOUL- South Korea’s mom-and-pop investors are defying last week’s global financial markets rout by pouring even more funds into US stocks, a years-long trend that analysts and investors bet will continue due to the depressed value proposition at home.
South Korean retailers have been scooping up Nvidia Tesla Inc. and Apple shares this year fueled in part by the worldwide AI-frenzy, a move that comes despite government efforts to boost the domestic stock market.
Sunny Noh, a 49-year-old who has been investing in Tesla since 2020 and now holds about 85 percent of his financial assets in the electric-vehicle maker, said he sees the recent market plunge as a long-term buying opportunity.
“It can fall in a year or two, but it will rise again in the longer term of 10 years,” he said.
Retailers like Noh have been frustrated by the so-called “Korea discount” of lower shareholder returns and depressed valuations in the $1.8 trillion stock market, home to global tech titans like Samsung Electronics and SK Hynix and automakers such as Hyundai Motor
For South Korean listed companies, the last 10-year ratio of dividend payment to net income, for instance, stood at an average of 26 percent , lower than 55 percent in Taiwan, 36 percent in Japan and 42 percent in the US according to the Financial Services Commission.
Investors are even more disappointed that Samsung and Hynix aren’t in the forefront of the AI-boom. Shares of Samsung are down 4 percent so far this year versus a 120 percent surge for Nvidia. Hynix has fared better, up 25 percent.
The past 10-year price-to-book ratio for Korean companies sits at an average of 1.04 versus 3.64 for the US
These numbers partly explain why retailers, popularly known as “ants” because of their massive 14-million number and capacity to act as a powerful collective force, have been investing in droves in overseas markets for well over a decade.
Ants like Noh bought $9 billion worth of US stocks between January-July this year, after selling $2.8 billion in 2023 – the first sell-off after three years of a US stock investment boom.
They sold a record-high 16.3 trillion won ($11.9 billion) worth of domestic stocks in the same period, driving the KOSPI down 1.3 percent so far this year when the S&P 500 and Nikkei jumped 13 percent and 5 percent, respectively.
To be sure, foreign buying of Korean stocks between January-July also rose to a record 27 trillion won, but they accounted for 27 percent of average daily turnover versus 54 percent for retailers.
