KOSPI rout sends Korean 'ants' back to Wall Street

South Korea's stock market slump is reversing a government-backed push to keep retail investors at home, as data shows a sharp rise in overseas equity purchases. In July, retail buying of US stocks reached $4.6 billion, the highest in six months, according to Korea Securities Depository data. That compares with a monthly average of $2.7 billion in 2025, a year when such investments more than tripled from the previous year.

The surge marks the first time since February that retail investors bought more US shares than domestic ones, underscoring how quickly confidence in the local market has faded. The KOSPI fell 33% from its June peak, posting its worst monthly loss since the 2008 global financial crisis. Chipmakers Samsung Electronics and SK Hynix accounted for 76% of the index's 2,257.8 trillion won ($1.59 trillion) market value wipeout, as concerns over AI spending durability and Chinese competition weighed on sentiment.

The shift threatens to revive a long-standing pattern of Korean retail investors funneling savings abroad, which analysts say could pressure the won. "Outflows slowed because the domestic market was strong, but they re-accelerated as the KOSPI collapsed," said Kwon Ah-min, an FX analyst at NH Investment Securities. "They are tired of the domestic market."

The won's 8% jump in July to a nine-month high also encouraged foreign investment, as a stronger currency lowers the incentive to repatriate funds. Retail deposits in Re-shoring Investment Accounts, introduced in March with tax incentives, recorded their first monthly decline in July, according to Korea Financial Investment Association data.

In August alone, retail investors have bought a net $278 million of overseas equities, while deposits in domestic stock trading accounts fell to 102.8 trillion won as of Monday, the lowest since mid-February and down from a record 140 trillion won in early June. Bank of America analysts warned that if Korean equities continue to lag US counterparts, domestic retail outflows could re-emerge, making sustained won appreciation difficult.