Korean stocks "collapse," a massive influx of South Korean retail investors rushes to U.S. stocks

South Korean retail investors are flocking to the U.S. stock market, optimistic about the stock market prospects under Trump's second term.

According to data from the Korea Securities Depository, as of the end of 2024, South Korean investors' holdings in U.S. stocks reached a record $112.1 billion, a year-on-year increase of 65%.

This change also reflects South Korean investors' disappointment with the long-term sluggish performance of their domestic stock market. In the Korean stock market, South Korean investors net sold 54 trillion won (approximately $36 billion), leading to a cumulative decline of about 10% in the Korea Composite Stock Price Index over the past year.

Public data shows that over the past decade, the annualized total shareholder return of the South Korean stock market has only been 5%, far below Japan's 10% and the U.S.'s 13%. Moreover, the proportion of listed companies in South Korea trading below book value is quite high, reaching about two-thirds. In light of this situation, many retail investors, known as "ants" (approximately 14 million), have begun to seek higher overseas returns.

Among South Korean investors' overseas stock investments, Tesla has become the most popular stock. As of last month, the value of Tesla shares held by South Korean retail investors reached $24.5 billion, followed by Nvidia and Apple, with holdings valued at $12.1 billion and $4.9 billion, respectively.

Namuh Rhee, head of the Korea Corporate Governance Forum, stated:

“This shift highlights investors' disappointment with the poor returns of the domestic stock market.”

“Looking ahead, unless significant changes occur, this trend may continue.”

Some analysts suggest that as domestic political turmoil intensifies, the shift of South Korean retail investors towards U.S. stocks may further escalate.

Last month, the South Korean National Assembly impeached President Yoon Suk-yeol, increasing market uncertainty; at the same time, Trump's election as U.S. president raised concerns about increased trade tariffs and reduced subsidies for South Korean battery manufacturers, exacerbating pessimism towards the domestic market.

To boost the sluggish stock market, South Korea began promoting "Korean Special Valuation" at the beginning of this year, announcing a corporate value enhancement plan similar to Japan's, aimed at supporting shareholder returns through incentives, including tax benefits.

However, since the launch of the plan in February, only 3.9% of listed companies have indicated they will participate. Many investors have expressed disappointment with the plan's effectiveness, believing that the lack of strong measures has significantly undermined its impact.

Analysts believe that the low valuation of the South Korean stock market is mainly attributed to the legal and regulatory framework designed to protect large family-owned enterprises, sacrificing the interests of minority shareholders