South Korean retail investors pour $4.5 billion into US stocks

South Korean retail investors significantly increased their exposure to the US stock market in July, with net purchases reaching approximately $4.5 billion. This surge comes as these investors have been net sellers of domestic South Korean equities.

A notable trend is the heavy investment in American Depositary Receipts (ADRs) of South Korean companies. Specifically, approximately $840 million flowed into SK Hynix ADRs, making it the second most purchased US security by South Korean retail investors. Analysts have noted that these ADRs are trading at a premium of about 10% compared to their domestic counterparts in Korea, a phenomenon described by Acadian Asset Management's Owen Lamont as “absolutely crazy” and a potential “symptom of a bubble.”

Despite shifting markets, the underlying investment theme remains consistent. Experts suggest that investors are not abandoning AI-related themes but are instead seeking higher liquidity or perceived quality in US-listed AI hardware stocks. Additionally, there is a high demand for leveraged ETFs, with four of the top ten most purchased US securities by South Korean retail investors being leveraged products, such as the Direxion Daily Semiconductor Bull 3X Shares ETF (SOXL).