So far this year, Korean retail investors have bought about 9 billion US dollars of US stocks and sold about 11.9 billion US dollars of Korean stocks during the same period, setting a new record. In order to stimulate the economy and boost the stock market, the South Korean government announced a series of tax relief measures to be discussed this year, but Korean retail investors are not paying for it.
South Korean retail investors chose to ignore the big shock in US stocks last week and continue to buy US stocks.
On August 14, according to media reports, although the South Korean government has introduced several measures to boost the local stock market, under the AI frenzy, South Korean retail investors have been investing in US stocks since this year. Korean individual investors prefer Tesla, followed by Nvidia and Apple with the largest holdings.
According to the data, between January and July of this year, Korean retail investors bought US stocks worth about 9 billion US dollars and sold a record 16.3 trillion won (about 11.9 billion US dollars) of Korean stocks during the same period.
As a result, South Korea's Seoul Composite Index has fallen 1.3% so far this year, while the S&P 500 Index and Nikkei 225 Index have cumulatively increased by 13% and 5%, respectively.
This group of retail investors in Korea is disappointed with local Korean companies. For example, they think that Samsung and SK Hynix are not at the forefront of the AI boom. So far this year, Samsung's stock price has dropped 4%, while Nvidia's share price has soared 120%. SK Hynix performed slightly better, rising 25% this year.
According to statistics from the Korea Financial Services Commission, the average dividend to net income ratio of listed Korean companies over the past 10 years was 26%, lower than 36% in Japan and 42% in the US. Furthermore, over the past 10 years, the average net market ratio of Korean companies was 1.04, while the net market ratio of US companies was 3.64.
In fact, in order to stimulate the economy and boost the stock market, the South Korean government announced a series of tax relief measures to be discussed this year. But Korean retail investors aren't paying for it.
South Korean President Yoon Seok-yeol pointed out earlier that the tax rate is one of the reasons why the South Korean market's performance lags behind foreign competitors. Since then, in order to boost the stock market and attract more foreign capital, the government launched the “Enterprise Value Enhancement” program and promised to strengthen these efforts through tax incentives. The new measures include rewarding companies that expand shareholder returns and encouraging them to use more cash for share buybacks and dividends.
In June of this year, the South Korean government plans to extend the ban on short selling in the stock market until March of next year, while increasing the penalties for illegal activities such as naked short selling. “Naked short selling” may result in “life imprisonment.”
In addition, the South Korean government also plans to extend tax breaks for key technology industries such as semiconductors for three years and delay plans for cryptocurrency holding taxes for another two years.