KOSPI breaks through 6,500 points, individual investors still mainly buy inverse funds

This month’s KOSPI index first broke through 6,500 points during trading, showing a strong rebound, but individual investors instead large-scale cash outflows from the securities market, even focusing on buying inverse index funds to hedge against falling stock prices.

According to statistics from the Korea Exchange and Yonhap Infomax, individual investors net sold 14.767 trillion won in the KOSPI market from April 1 to 24. This amount has exceeded the monthly record of net sales set in September last year at 10.4858 trillion won. Since the beginning of this year, the buying and selling flow of individuals shifted from net selling in January to net buying in February, with the purchase scale expanding to 33 trillion won in March, but again turning to a clear seller’s advantage in April. This contrasts with foreign investors’ net buying of 2.53 trillion won during the same period.

Individual selling was concentrated in leading semiconductor stocks. From April 1 to 24, the stock with the largest net sell by individuals was Samsung Electronics, with net sales of 6.581 trillion won, followed by SK Hynix with net sales of 2.498 trillion won. These two stocks accounted for 62% of the total net sell by individuals. The KOSPI index was driven higher by foreign buying, surging 28% this month, and on the 21st, it broke through the pre-Iran war historical high after two months, setting new records for three consecutive trading days by April 23. Individuals see this upward range as an opportunity to take profits rather than to buy more.

Notably, individuals not only sell stocks to secure cash but also transfer funds into commodities that profit when the index falls. The most net bought exchange-traded fund (ETF) this month was KODEX 200 Futures Inverse 2X, with a purchase scale of 540.2 billion won. This product is a reverse double leverage ETF tracking the daily returns of the KOSPI 200 futures index, with gains amplified when the index falls and losses potentially magnified when it rises. Additionally, KODEX Inverse and TIGER Inverse ETFs were also net bought by 165.6 billion won and 6.3 billion won, respectively. This suggests a strong psychological readiness among investors who believe the market has overheated and are preparing for potential declines.

The outlook in the securities industry shows diverging opinions. Yuanta Securities pointed out that this year, the consensus for KOSPI’s current net profit exceeds 600 trillion won, with continuous upward revisions of earnings estimates centered on semiconductors, mentioning the possibility of further gains based on improved performance. Daol Investment Securities commented that factors such as expectations for a second round of US-Iran negotiations and first-quarter semiconductor earnings are already reflected to a considerable extent in recent surges. Ultimately, the key variable for the market’s future direction is whether corporate earnings can keep pace with the rising stock prices. If this trend continues, the large-scale selling and inverse ETF buying by individuals may be seen as preemptive measures; but if earnings improve further, it could instead become a burden for individual investors.