Amid concerns building over risks of individual investors seeking short-term profits, a local expert said Monday that the latest buying trend will likely result in great success in the long run.
“Retail investors tend to have invested in blue chips during the recent buying binge, like Samsung Electronics, SK hynix, Hyundai Motor Company as well as relatively safer products like index funds,” said Yoo Ik-sun, head of the investment strategy unit at local asset manager Hanwha Asset Management,
In the face of a looming liquidity crunch due to the novel coronavirus crisis, foreign investors have been on a selling spree recently, dumping tens of trillion won worth of stocks. Individual investors, on the other hand, bought a similarly large amount of stocks during the same period, serving as a shock absorber for the domestic stock market. Such individuals’ buying mode has been likened to a large-scale rebellion organized by peasants in the late 1800s in Korea to resist oppression by feudal lords and to guard the nation from foreign influence. Retail investors’ buying spree was seen somewhat as a movement to save the stock market from a massive vacuum caused by fleeing foreign investors.
“When the Kospi market index crosses the 2100, or 2200, mark again, many of those individual investors would try to cash in their stocks. If they hold the blue chip stocks in the long term, however, they would eventually win the ‘battle,’” he added.
He also forecast that the coronavirus will create some long-term investment opportunities in newly emerging segments, such as services designed to reduce face-to-face contact, digitalization and office-related technologies.
For 30 trading days from March 5 to April 16 this year, foreign investors sold a net 14.8 trillion won, much higher than the net 9 trillion won worth of shares foreign investors sold in 33 days during the 2008 global financial crisis.
On April 17, foreign investors were back in a buying mode for the first time after offloading shares for around 40 consecutive days.
The Korean government has been rolling out financial measures to prop up the tumbling economy, but some market analysts expect that it could take some time for businesses and the public to feel the positive impact of those support measures.
By Kim Young-won (firstname.lastname@example.org)